Clinton Unveils Budget to Cut Deficit, Taxes

President Clinton belatedly unveiled his complete 1997 budget proposals Tuesday--a handbook of election-year priorities that he said would wipe out the deficit by 2002, ease some taxes and preserve programs for working Americans.

The proposed $1.64-trillion spending plan, which includes phasing in a $500 tax credit per child for many families, would put a squeeze on some federal spending. But it clearly avoids the more stringent curbs sought by congressional Republicans in health care, welfare and other areas.

At the same time, Clinton used the occasion of his budget announcement to call on GOP leaders to work with him to achieve a balanced budget.

“In the coming weeks, we must seize the opportunity we now have to give the American people a moment of real bipartisan achievement,” the president said. “I am ready to work with the leaders of Congress to finish the job.”

Clinton’s 1997 spending blueprint was first released as a vague outline last month and is given little chance of being accepted by the GOP-led Congress. Indeed, Congress has not even managed to finish work on this year’s budget, leading to the peculiar spectacle Tuesday of a president unveiling his 1997 plan even as the Senate chamber was consumed by debate over spending for 1996.

Republicans assailed Clinton’s 1997 program as a manifestation of big-government, liberal priorities. Moreover, critics pointed out that a majority of the proposed spending cuts are not scheduled before 2000--raising doubts about whether they ever will be carried out.

“We don’t have a balanced budget,” said Senate Majority Leader Bob Dole (R-Kan.), Clinton’s likely opponent in the November presidential election. “We tried. He vetoed it.”

Still, Dole said he was ready to have “meaningful discussions” with Clinton, “if the president’s serious about a real budget.”

Senate Likely to Act

The Senate is expected to vote once again on a constitutional amendment to balance the budget later this year, Dole told reporters. Dole also said that he and Clinton had agreed in a phone conversation on Tuesday that a proposal to create a line-item veto, enabling a president to strike portions of spending bills, should be enacted this year but not become effective until Jan. 1, 1997. That would “take it out of politics,” Dole said.

The White House budget plan, laid out in four books totaling more than 2,000 pages, provides a sharp contrast to the Republican agenda.

Clinton would provide a smaller tax cut than the Republicans have proposed, go further in restricting loopholes used by investors and corporations and move more gingerly toward curtailing the growth of health care--to cite a few basic differences.

The president proposed a tax deduction of up to $5,000 for education and training expenses, broader eligibility for individual retirement accounts and new tax benefits for small business. Overall, Clinton’s tax cuts for households add up to $107 billion; small-business tax cuts come to about $12 billion.

As of January, Republicans had publicly proposed a $195-billion tax cut.

Differences also jump out in the treatment of health care. The White House would seek $124 billion in Medicare savings over seven years--compared with $168 billion sought by Republicans in January--and $59 billion in Medicaid savings. Republicans propose saving $85 billion from Medicaid over the seven years.

Conservatives have long accused the administration of shying away from the sorts of health care curbs that are needed to control spending over the long haul.

“This is not about green eyeshades and calculators. This is about ideas,” said Rep. John R. Kasich, (R-Ohio), chairman of the House Budget Committee. “This administration is addicted to Washington spending, Washington taxes. This administration does not trust the American people.”

Clinton has invited Dole and House Speaker Newt Gingrich (R-Ga.) to come to the White House today to discuss a range of unfinished business on the budget, including the immediate matter of 1996 funding and longer-term goals for conquering the deficit.

Much of the government has been funded since last fall through a series of temporary measures that have led to confusion and two partial government shutdowns. The 1997 budget year begins Oct. 1.

Under the administration’s proposal, families earning up to $60,000 would qualify for a $300 tax credit for children under 13 starting next year, and the credit would rise to $500 in 1999. Families earning between $60,000 and $75,000 would get a smaller credit.

The benefit would terminate in 2000 if deficit reduction fails to meet projections, a clause that critics say would not be invoked in an election year.

In contrast to the child credit, which is similar to GOP proposals, Clinton veered from the Republicans by declining to propose a reduction in the capital gains tax.

Rather, he called for a technical change requiring investors to compute the average purchase price of their shares of stock when calculating capital gains on a sale of those shares. Currently, investors can say the shares they sold were the most costly ones, thereby reducing the taxable gain.

This change could raise $4.1 billion by 2002, the administration estimated.

To help offset the lost revenue from the tax cuts, the White House would seek to raise money by renewing a luxury tax on automobiles priced at more than $34,000, a levy that is scheduled to expire after 1999, and also extend a 10% excise tax on airline tickets, which lapsed at the end of last year.

It would also tighten a range of tax loopholes, including the ability to avoid taxes by renouncing U.S. citizenship.

Uncertainties Seen

Overall, the administration forecasts savings of $593 billion by 2002, with just over half--$297.2 billion--coming from defense and other programs that operate on annual appropriations.

Critics cautioned, however, that the administration plan has built-in uncertainties that rely in part on the actions of future political leaders and economic conditions.

Times staff writer Janet Hook contributed to this story.

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Budget Trends

Spending in the ‘90s for some important federal programs (in billions of dollars)

*--*

Social College Security Medicare Medicaid AFDC* aid Defense 1990 $246 $108 $41 $12 $10 $299 1991 $266 $114 $53 $14 $11 $273 1992 $285 $129 $68 $15 $10 $298 1993 $302 $143 $76 $16 $13 $291 1994 $317 $160 $82 $17 $7 $282 1995 $333 $177 $89 $17 $13 $272 1996 $348 $194 $95 $17 $11 $266 1997 $365 $207 $106 $18 $10 $259

*--*

* Aid to Families With Dependent Children

Note: 1996 figures are estimates, 1997 figures are projected

Source: Office of Budget and Management