Clinton and GOP Suspend Talks

President Clinton and congressional negotiators suspended budget talks Tuesday for at least a week, declaring that nearly 50 hours of top-level negotiations had left them still unable to resolve fundamental differences.

While both sides said that they were hopeful a deal could still be made, their announcement raised the possibility that their 3-month-old effort to craft a multiyear spending plan is heading toward a final breakdown.

Just hours after the talks ended, Clinton vetoed the GOP plan to overhaul the welfare system, saying that the Republican measure would hurt children and would not enable parents to make the transition from public assistance to work.

The suspension of budget talks came after a four-hour negotiating session at the White House. Officials said that the talks would resume in seven to 10 days, or about a week before the Jan. 26 expiration of the temporary funding measures that reopened the government this week.

After the session, each side stressed that it had made concessions and accused the other of stubbornness. But at a moment when neither wants to look like the cause of an impasse, they were careful to keep their remarks civil.

“We moved closer together today,” Clinton said. “I hope that we can continue to make some progress.”

He said that the talks were still hung up on the Republican insistence on large tax cuts, combined with their desire for finding more savings from Medicare, Medicaid, environmental protection, education and tax benefits for the working poor.

Clinton tried to sweeten his deal by rolling out a package of new concessions. At the beginning of the meeting he offered Republicans $37 billion in additional savings from entitlement spending, and at the close of the session he advocated a plan for limited tax cuts that he argued would be acceptable to the Republicans while advancing Democratic social goals.

Even with Clinton’s latest concessions, however, the GOP wants about $100 billion more in cuts from programs than Clinton is willing to accept.

‘The President’s Move’

The Republicans emerged from the meeting listing the concessions that they have made and insisting that the next step is a new substantive proposal from Clinton.

“We think we’ve moved a long way,” said Senate Majority Leader Bob Dole (R-Kan.). “It’s the president’s move, and we’ll see what he has to say.”

But Dole acknowledged that the differences between the sides are great: “It’s a wide difference in where we are right now.”

“What we have been doing is moving laterally,” said House Majority Leader Dick Armey (R-Texas).

Still, House Speaker Newt Gingrich (R-Ga.) insisted that a break in the talks until next week might be the catalyst for an agreement. “For the moment, we think this is the best way to let things develop a little bit.”

Both Clinton and the Republican leaders made it clear that in the next week they will try to increase political pressure in the hope that the other side can be persuaded to move toward closing the multibillion-dollar spending gap that still divides them. Clinton plans a rare full-dress press conference Friday at the White House to drum up support before departing on a weekend trip to Bosnia.

Clinton’s new strategy is to focus on whether the Republican tax cut of a net $177 billion over the next seven years is necessary for a compromise. “Do the Republicans absolutely have to have that huge tax cut to have a deal?” Clinton will ask, according to an aide. That cut is now “the barrier to any agreement.”

And White House aides were arguing that some Republicans in Congress are already responding to Clinton’s call to scale back the GOP tax cut proposal.

Clinton’s latest proposal on entitlement spending would increase cuts in the future growth of Medicare, over seven years, from $102 billion to $125 billion. Medicaid savings would rise from $52 billion to $59 billion; welfare from $38 billion to $43 billion, and the earned income tax credit, which gives a tax break to the working poor, from $2 billion to $5 billion.

Clinton’s new tax cut proposal would aim to help struggling families and would have a far smaller price tag. He argued that reducing the size of the tax cut would leave more money in government coffers and enable Republicans to scale back the $201 billion in savings they have sought in Medicare spending.

On the Republican side, congressional leaders spoke of trying to test their political strength by putting their balanced-budget plan, and Clinton’s, to a test vote in Congress. And they plan to step up their efforts to woo conservative members of the minority party, the so-called Blue Dog Democrats.

Efforts to win a congressional referendum on the GOP and White House plans, however, may founder in the Senate, where it will be more difficult to get a vote. At a press conference after the negotiations, Dole dodged a question from reporters on whether he plans to arrange such a vote.

The Proposals

At the close of talks, the proposals looked like this:

Clinton was proposing $125 billion in Medicare savings over seven years, compared with the Republicans’ $168 billion; he was offering $59 billion in savings from Medicaid versus the GOP’s $85 billion; and $53 billion on welfare and the ‘working poor’ tax credit, compared with the GOP’s $75 billion.

Clinton was proposing $87 billion in tax cuts, not including the last-minute offer that would have increased the figure, compared with the Republicans’ net $177 billion. And he was proposing $295 billion in cuts in discretionary programs versus the Republicans’ $349 billion.

Despite the negotiators’ optimistic public statements, White House officials and congressional aides on both sides of the aisle privately acknowledged later that the talks might collapse permanently.

“The sense is we come back after a week with a firm decision about whether or not it’s over,” said a Democratic aide. “It was a cordial parting, but there was large agreement that the differences were pretty significant.”

A Gingrich aide said: “The White House would like very much to believe that it’s a brief hiatus. The fact is, the Republicans feel the White House has made very little movement. I don’t think there’s a lot of hope.”

An Eye on the Markets

One factor that may prevent a collapse of the talks is the possibility of a sharp negative reaction from the financial markets. The markets plunged Tuesday, with bond yields rising and the Dow Jones industrial average dropping 67.55 points to 5,130.13.

Analysts said that the decline is largely due to worries about disappointing corporate earnings. But budget jitters also hit the market late in the day, and stocks reacted in part to a late surge in bond yields after rumors spread that budget talks had broken down. The bellwether 30-year Treasury bond yield jumped to 6.11%, its highest close since Dec. 20.

If the two sides are heading toward a breakdown of the talks, they still must thrash out a series of issues that they cannot avoid.

Still unsigned are a series of six appropriation bills that Clinton has vetoed. The failure to enact those bills into law has held up fiscal 1996 funding for nine Cabinet agencies and 38 commissions and boards. Congress and the president have agreed to fund those agencies temporarily, but that stopgap funding will expire Jan. 26.

Gingrich said that the negotiators now have three options for defusing the budget standoff: reaching a seven-year budget deal despite the ongoing difficulties, fashioning a bipartisan congressional majority to pass a budget without White House approval or continuing to fund the government without any long-term deal.

“We hope we will see something decisive out of the White House that will allow us to move forward,” he said.

In particular, the Republicans insisted that the GOP has made more concessions than has the White House in such critical areas as Medicare, Medicaid and tax relief.

Clinton argued that he also has modified his position significantly from his original plan, which would have balanced the budget in 10 years rather than seven. A 10-year plan would have required smaller cuts each year.

Democrats contended that the GOP’s proposed tax cut of $177 billion over seven years would restrict spending for health care and other social programs too much. The White House had recently recommended a tax cut of $87 billion, which is targeted more at the middle class than is the tax cut in the GOP plan.

“The question is how much deeper do we need to go in the programs that protect our priorities and still allow for the tax cuts that the Republicans are asking for,” said Senate Minority Leader Tom Daschle (D-S.D.).