Clinton Is Near to Proposing Tax Cut, Aides Say

With only days remaining before final decisions on his federal budget plan, President Clinton is leaning strongly toward a modest middle-class tax cut and is also contemplating major cutbacks and restructurings in federal departments, Administration officials said Thursday.

After a series of high-level meetings in recent days, Clinton is expected to propose a tax cut next week that would most benefit middle-income wage earners, yet not worsen the federal budget deficit, the officials said.

In recent weeks, Administration officials have most often talked about a reduction that would expand the personal tax deduction or provide a tax credit for families with children, at a cost of about $30 billion.

The only open question, they have said, is whether they could find a way to finance such a cut. That obstacle has apparently now been overcome, although full details about that element of the budget plan were not immediately available.

In their effort to keep up with Republican promises to shrink the bureaucracy, the Administration has been scrutinizing a series of cuts in federal agencies and has considered completely shutting down the Department of Energy and the Department of Housing and Urban Development.

In early budget meetings, the President “told the staff that he wanted very bold proposals that would bring very substantial changes,” one official said.

However, the officials eventually backed away from eliminating HUD after Housing Secretary Henry G. Cisneros offered a counterproposal that he said could save money without abolishing the agency outright.

The Energy Department, another agency that has been accused of wasteful practices, was also spared, officials said.

“No proposal for eliminating a department reached the President,” one official said.

Former President Ronald Reagan proposed eliminating the Energy Department when he first came to office in 1981. But the plan was abandoned after the Congressional Budget Office expressed skepticism that the move would save much money.

The Clinton Administration also has asked other agencies to prove that they fulfilled their mission and to show that the continued existence of many parts of their agencies was necessary.

The Administration’s “reinventing government” program calls for the elimination of 272,000 federal jobs. So far, about 75,000 have been cut.

Clinton officials are expected to complete their budget decisions before Christmas for a fiscal 1996 budget that will be sent to Congress in February. Some details of the spending plan may be included in an address that Clinton is expected to give next week to further explain what course he intends to navigate in the aftermath of last month’s Republican election victories.

Because the Republicans who will soon control Congress are likely to vastly rewrite the proposal, the 1996 budget may well be the least important of the three Clinton has offered. But it retains at least symbolic importance as an indicator of his goals.

The spending plan will clearly provide further evidence of a White House move to the political center in the weeks since the widespread Democratic losses in the Nov. 8 congressional elections.

Offering a middle-class tax cut would allow Clinton to claim that he had fulfilled a celebrated promise from the early days of his 1992 campaign. It would be far smaller than the $500-a-child tax credit that is called for in the Republicans’ “contract with America.”

But the Administration has adamantly maintained that its proposal must be “deficit-neutral.” That feature is dear to the President, and perhaps even dearer to his chief of staff, Leon E. Panetta, who was formerly the director of the Office of Management and Budget.

Top White House officials have held a swirl of meetings since the congressional elections to reset their course for the next two years. While some decisions have yet to be made, it is clear that the Administration intends to hew to the principle of fiscal discipline, officials say.