Clinton Hints at Compromise on Budget Plan

Reversing field, President Clinton said Thursday he might accept a budget agreement that eliminates the federal deficit in seven years--a step he had previously rejected as exacting too great a toll on the poor and the elderly as well as on other essential spending.

Clinton said the seven-year span might become part of a compromise with Republican lawmakers if the GOP would accept some of his basic requirements, such as maintaining the Medicare and Medicaid programs at sufficient levels and spending enough on the environment and new technology.

The President, however, issued a warning that he intends to veto legislation that contains the current Republican plans for Medicare reform and tax cuts. The White House argues that Republicans want to cut too much from Medicare and that they offer too large a tax cut.

In other budget action, the Senate Finance Committee formally approved a $245-billion, seven-year tax-cut bill that the committee’s Republicans had agreed upon last week. The bill would provide a $500-a-year tax credit for each child younger than 18 for single parents earning up to $75,000 a year and for couples earning up to $110,000.

Clinton’s new position on the number of years that might be included in a budget-balancing plan could open the way to compromise, especially because House freshmen have been unyielding on that point.

It comes at the cost of some embarrassment to the White House. Administration officials previously had warned that trying to balance the budget in seven years would force the government to take too much from programs for the poor and the elderly and would slow spending so much that the economy would suffer.

Clinton’s statement got favorable reaction from some leading Republicans on Capitol Hill.

Senate Majority Leader Bob Dole (R-Kan.) said it offered “a glimmering of hope that we may be able to come together. . . . I would hope that is a sincere offer by the President.”

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House Budget Committee Chairman John R. Kasich of Ohio said: “He mentioned the word seven. I want to encourage the President for using the word seven.

But Kasich said he could not accept such a plan if it meant that the GOP must accept the Administration’s more optimistic economic assumptions. White House economists predict that current policies will produce smaller deficits than those forecast by the Republicans, and they therefore argue that the deficit can be erased with smaller spending cuts.

If Clinton is tying compromise to such predictions, then “he would be speaking in a language that I do not understand,” Kasich said.

In a morning press conference, Clinton said that if the two sides can “get together in genuine honesty and openness, I think there’s a way for me to meet their stated objectives, which is a balanced budget in seven years, with a family tax cut, and I think they want a capital gains tax cut and extending the Medicare trust fund to 2006.”

He added that it probably would be necessary to build in some mechanism to adjust spending depending on government revenues and obligations because such variables are hard to predict.

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White House Press Secretary Mike McCurry said the President had not figured out precisely how to balance the budget in seven years. He also said that if a seven-year plan were to include the GOP’s proposed $245-billion tax cut and its $270 billion in cuts in the growth of Medicare, “the results could be devastating.”

The White House has been alternating between conciliation and threats on the budget for weeks, and the President’s comments Thursday came after he issued the warning about how he would treat the current GOP Medicare and tax-cut proposals.

“My message to the Republicans is simple: I hope you will think again,” he said. “I will not let you destroy Medicare and I will veto this bill.”

Dole reacted sharply to the statement: “If anyone needs to think again, in my view it’s President Clinton. The President continues his cynical reelection campaign designed to scare the American people, especially senior citizens.”

Thomas Mann, an analyst at the Brookings Institution think tank here, said Clinton’s new proposal is part of an effort to create an impression that he is the reasonable party in the long-running budget dispute.

“He’s trying to set a mood in which a veto will be seen as reasonable--and not a vote against a balanced budget,” Mann said.

Clinton’s comments come at a time when Republicans in Congress are increasingly confronting the possibility that they will not complete work on their tax and spending bills by mid-November, when stopgap financing for the government expires.

“It is unlikely that it could be done” by the deadline, Kasich said. The government also is expected to bump up against its debt limit by then--if not sooner--so Kasich said Congress may have to pass a short-term increase in the government’s authority to borrow.

“We will consider a very short-term debt ceiling when it is necessary,” he said. But he indicated that it will not be until after next week, when the House and Senate consider their omnibus budget bills.

A central question, however, is whether a temporary debt-limit increase could pass Congress before the broader budget is resolved. Many House Republicans, especially members of the rambunctious freshman class, have said they would not vote for any debt-limit increase in the absence of a balanced-budget agreement.

Republican leaders in the House, scrambling to cobble together enough GOP votes, have tried to assuage party members concerned about Medicaid funding formulas, proposed big cuts in farm programs and other provisions.

GOP leaders said the farm-program changes pose the most daunting obstacle to approval. “Agriculture is a mess,” said Kasich. “Big changes are tough to do.”

Times staff writer Janet Hook contributed to this story.