White House to Offer GOP New Budget Proposal

The White House disclosed plans Tuesday to offer Republicans a new budget proposal later this week, in one of several signs that the negotiations may break free of their recent impasse.

Officials said that the White House and congressional Democrats have been jointly crafting a plan that would cut discretionary spending more than President Clinton’s earlier spending blueprint to balance the budget in seven years. The proposal largely would maintain Clinton’s long-term spending plans for Medicare and Medicaid and possibly for his proposed $105-billion tax cut as well.

The plan apparently relies substantially on expectations that the Congressional Budget Office will make an upward revision soon in its long-term economic forecasts, thereby providing projected figures that will make it easier to bring the budget into balance.

The plan may still undergo substantial revisions before it is offered to GOP negotiators, perhaps as early as Thursday, and it is not clear how many congressional Democrats will endorse it.

But since it may answer, if only superficially, the GOP’s demand for Clinton to provide an explicit starting point for negotiations, it could prove to be a catalyst to progress in the stalled negotiations.

“This is a step in the right direction,” said Sen. J. James Exon (D-Neb.), a deficit “hawk” who is ranking minority member of the Senate Budget Committee. Sen. Trent Lott of Mississippi, the Senate Republican whip, said that the crafting of a new White House budget plan is “an essential step in beginning to make progress.”

Robert B. Reischauer, a former director of the budget office, said that Clinton is “in an increasingly untenable position of not having a plan on the table.” This draft plan “shuts down a vulnerability and opens up an avenue on which the Republicans can meet him.”

He added: “Whether they want to or not is an open question. He isn’t giving up a great deal.”

Meanwhile, in a letter to Congress, June O’Neill, the current budget office director, said that she expects the overall effect of the modifications in economic assumptions and projections “is likely to be a more favorable budget outlook than CBO presented in August.”

Exon said that he expected the more optimistic numbers could add $100 billion to expected federal revenues. And aides to the GOP leadership said that this adjustment could help open a path to a budget settlement.

Another hint of possible progress came in an endorsement this week from Republican governors of a proposal to change calculations of the consumer price index.

Republican Gov. Tommy G. Thompson of Wisconsin, a close ally of the congressional GOP leadership, was among the members of the National Governors’ Assn. urging Congress and the president to undertake a revision that could further ease the path to a balanced budget.

The consumer price index is used to calculate the growth in federal cost-of-living adjustments. Many economists have suggested that the index overstates inflation, arguing for downward revisions that could save the federal government billions. By the governors’ estimate, the savings could total $140 billion to $280 billion over the next seven years.

The effort to craft an administration budget plan drew its impetus both from the White House and from the moderate to conservative congressional Democrats--so-called “Blue Dog Democrats”--who have been arguing that Clinton needed to demonstrate his intentions to bring the budget into balance.

One key difference between these sides was over the proposed Clinton tax cuts.

Many congressional Democrats have been arguing that the cuts should be put off to future years, if not eliminated altogether. In the discussions, there were “very strong feelings on both sides,” Exon said.

One Democratic member of Congress said that the White House did not want to abandon the tax cuts, which would go to help families pay tuition expenses, lest it seems like a presidential flip-flop.

In preparing its seven-year budget proposal, the administration has prepared a more detailed version of its plan, released in only broad outlines earlier this year, to reduce the growth of Medicare spending by a projected $124.4 billion, compared to the $270 billion in savings envisioned by the GOP budget plan.

According to an administration analysis, the Clinton Medicare plan would increase Medicare beneficiaries’ monthly premiums from $42.50 in 1996 to $77 in 2002--but that is about $11.90 a month less than the premiums that would be charged under the GOP plan. The administration would try to encourage more beneficiaries to enroll in managed-care plans by expanding the number of managed-care options from which they can choose. Republicans, by contrast, would also offer financial incentives for Medicare beneficiaries to opt out of fee-for-service medicine.

The administration would reduce projected spending for payments to hospitals by $50.1 billion compared to $78.2 billion under the GOP plan. Payments to doctors would be scaled back by an estimated $14.8 billion under the Clinton plan, compared to $21.8 billion under the GOP budget.

The administration said in its analysis that the proposal would assure the financial health of the Medicare trust fund through 2011.