Clinton’s Budget Shows Optimism Over U.S. Deficit

WASHINGTON — President Clinton plans to send Congress a $1.6-trillion budget Monday that calls for consolidating hundreds of federal programs and generating savings of $144 billion over five years but is far more optimistic about the federal deficit than congressional budget experts.

With the Republicans who control Congress demanding a balanced budget by the year 2002, Clinton’s budget for the 1996 fiscal year that begins Oct. 1 will project a deficit below $200 billion almost every year for the next decade, well below the $290-billion record set in 1992.

For fiscal 1996, the deficit will hit $196.7 billion, the Administration predicts, underscoring the White House argument that Clinton has begun to clean up the fiscal mess left over from the 1980s in a more orderly and gradual fashion than is now being proposed by Republicans.

The Congressional Budget Office, however, warns that the Clinton figures are overly optimistic and cautions that the deficit could balloon to twice the levels the Administration now predicts early in the next century because of soaring health care and Social Security costs.

The Administration forecasts a much lower rate of health care inflation over the next decade than does the budget office, officials said.

And Clinton’s assertion that he will be able to keep the deficit below the $400-billion-plus levels projected by the CBO for the year 2000 and beyond is not backed up by specific spending cuts for those years. The Administration is counting on an extended freeze on all civilian and military “discretionary” spending from now until 2005 to make its deficit numbers work, officials said.

The spending cuts in Clinton’s plan include ending more than 130 programs outright and consolidating more than 270 others. But the cuts would achieve only a fraction of the savings required to meet Clinton’s long-range deficit targets.

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Clinton’s overall spending plan reflects a cautious and centrist agenda, one that critics said fails to provide a distinctive counterpoint to the radical budget cuts planned by congressional Republicans.

The budget offers relatively little along the lines of Clinton’s earlier focus on new spending for “public investments.” For example, it provides only a modest, $1-billion increase in education and job training programs and does not attempt to address the surging costs of Medicare, Medicaid and other major entitlements--the programs driving the deficit.

“The President’s budget proposal is, on balance, constructive, but it does not meet the challenge of articulating how to meet the fundamental problems we face,” argued Rob Shapiro, an analyst with the Progressive Policy Institute, a Washington think tank, and a Clinton economic adviser during the 1992 campaign.

Conservative Democrats were not pleased by the plan. Rep. Gene Taylor (D-Miss.) said that it smacked of “just this whichever-way-the-wind-is-blowing inconsistency.”

But while many observers dismissed Clinton’s budget as “dead on arrival” in the Republican-controlled Congress, Republican leaders Friday said that they are not likely to discard the plan altogether.

House Republican leaders said that they intend to incorporate spending cuts identified by Clinton in their own plans, as they look for ways to compensate for tax cuts that they have proposed in their “contract with America.”

In addition, they said that they will eliminate the handful of spending increases proposed by Clinton. Republicans have delayed their own efforts to craft an alternative budget until after the release of Clinton’s plan so that they can study his proposals and find areas of bipartisan agreement on spending reductions.

One area of agreement was immediately clear: Clinton did not propose any cuts in Social Security, which accounts for 22% of federal spending. Republican leaders have said that the retirement plan is off limits.

“We are glad to see that the President has offered $144 billion in new spending cuts, and we hope we can move quickly to incorporate those into our plans,” said Bruce Cuthburtson, a spokesman for House Budget Committee Chairman John R. Kasich (R-Ohio). “But of course, we feel the President has not gone far enough in the area of spending cuts and we are planning to go much farther.”

House Speaker Newt Gingrich (R-Ga.) refused to criticize Clinton’s budget, saying that he does not want to adopt the partisan tactics that Democrats employed during the Ronald Reagan Administration, when they annually declared White House budgets “DOA.”

“Newt still remembers how (Reagan budget director) Jim Miller brought the budget up to the Hill one year in an ambulance to dramatize the kind of treatment it was getting from the Democrats,” said Gingrich spokesman Tony Blankley. “And he doesn’t want to see that happen again.”

Clinton Administration officials argued that Republican delays in coming up with their own reductions show that the President has accomplished a difficult task just by proposing a detailed set of spending reductions.

“I think we are staking out a strong political position by producing a document in the first place,” said White House Press Secretary Mike McCurry.

“We have seen a lot of talk and no action from the Republicans, while the President has presented detailed cuts,” said Secretary of Labor Robert B. Reich.

The budget’s centerpiece is the $63-billion package of middle-class tax cuts unveiled by the President in December that would include a $500-per-child tax credit for families with incomes up to $75,000, expansion of individual retirement accounts and tax deductions of up to $10,000 per person for post-secondary education.

The budget also calls for an additional $81 billion in spending cuts over five years. Clinton has identified $144 billion in budget reductions to pay for the tax cuts and the additional deficit reduction.

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Much of the savings would come as a result of overhauling five agencies as part of the Administration’s “reinventing government” initiative. The White House would gain $26 billion in savings from program consolidations and job cutbacks in the departments of Energy, Transportation, and Housing and Urban Development, the Office of Personnel Management and the General Services Administration. Transportation would take some of the biggest hits--with cuts totaling $7 billion.

In addition, $81 billion would be generated through the year 2000 by extending a cap on military and civilian discretionary spending--that part of the budget not devoted to entitlement programs. Another $32 billion would come from cutting subsidies and other special benefit programs and $5 billion would come from lower interest payments based on the deficit savings.

Yet the Administration shied away from taking a bolder approach to cost-cutting and refused to propose eliminating any major Cabinet departments--as the Republicans are planning.

“The President deliberately made the decision to offer a budget that was real and we didn’t want to just move boxes around and offer the token elimination of a department just for the sake of symbolism,” explained one White House official.

The Clinton budget calls for abolishing the Interstate Commerce Commission, which is widely considered obsolete, while also transferring some functions of the National Weather Service to private meteorologists and eliminating the role of the Army Corps of Engineers in some smaller projects such as controlling beach erosion and constructing recreational harbors.

Despite the austere climate on Capitol Hill, Clinton plans to ask for higher spending for a few of his favorite programs.

Head Start, which has received new infusions of cash each year of Clinton’s presidency, would get an additional $400 million in 1996, bringing the program’s cumulative increase since 1993 to $1.1 billion. The national service program, called Americorps, would see an increase in the number of participants from 20,000 to 47,000 by the end of the 1996 budget year.

The Administration will also ask for an additional $188 million, or a 7% increase, in spending for AIDS treatment and prevention. Other beneficiaries would be a nutritional program for poor pregnant women and infants; Goals 2000, a long-term educational standards program; a joint Education-Labor apprenticeship program; advanced technology training programs in the Commerce Department and a new, consolidated job training program at Labor.

Administration officials said that the Clinton “investment agenda” would receive a total infusion of $8 billion to $11 billion, far below the $20-billion to $30-billion annual amounts proposed by Clinton during his 1992 campaign.

“We’re fighting for incremental increases,” one White House aide said. “But that can still be significant.”

Still, Administration officials acknowledged that it is doubtful any new spending initiatives will survive. “It’s going to be tough selling our investments, not our spending cuts,” one official said.

The White House political spin for the budget in coming days is likely to focus on the degree to which Clinton is doing the hard and painful work of deficit reduction while Republicans in Congress offer only rhetoric and promises.

While Republicans have yet to detail how they would get to a balanced budget, the Congressional Budget Office this week said that it would take more than $1 trillion in spending cuts to achieve that goal.

Administration officials said Friday that their new budget will show that in 1996 the deficit will represent a smaller percentage of the overall economy than at any time since 1979--just before Reagan took office.

“We are on a path of fiscal responsibility and at the same time we are still trying to address the other goals that we set out for ourselves when we arrived here of increasing investments in human capital and dealing with the problems of the middle class,” Reich said.