Broad Tax Cut Not Ruled Out by White House

President Clinton has not ruled out an across-the-board tax cut, called for by some Republican leaders, but he continues to favor trims aimed at the middle class, a senior White House aide said Sunday.

With the federal budget showing a 12-month surplus for the first time in nearly three decades, Clinton prefers a targeted and limited approach to tax cuts--and one that does not assume that the budget is now under control or that any surplus should automatically be converted into tax cuts, presidential assistant Rahm Emanuel said on NBC-TV’s “Meet the Press.”

Yet Clinton would not necessarily veto a general tax cut that reaches across all income levels, Emanuel said.

“If others have an approach, we’d love to see it,” Emanuel said. But, he added, “Where are they going to pay for tax cuts? Are they talking about cuts in education? Are they talking about cuts in health care? Are they talking about cuts in senior programs?”

Although Republicans have not been talking about those steps, his comments indicate that the Clinton administration is preparing for a robust and wide-ranging debate with Republicans in 1998 over federal spending decisions in a new era of balanced budgets.

That debate has been emerging swiftly this month after word that the federal budget had run a surplus over a 12-month period for the first time since 1970.

When Clinton took office in 1993, the annual deficit was $300 billion and was projected to rise to $570 billion by 2002, Emanuel said. A five-year White House budget deal with the Republican-led Congress this year called for gradual elimination of the deficit by 2002.

But the vigorous U.S. economy has closed the gap far sooner than expected. Some analysts have predicted a surplus of as much as $40 billion in the current fiscal year, which ends Sept. 30.

Now, much as in the shift in global politics that accompanied the end of the Cold War, public officials whose entire careers were forged in another era--that of perpetual budget deficits--find themselves grappling with a question that not many could have imagined just a few years ago: What to do with surplus revenues?

Some GOP leaders, including House Speaker Newt Gingrich (R-Ga.), have called on Clinton to offer a balanced budget in 1998, three years ahead of the five-year plan. Gingrich has also suggested returning the surplus dollars to the American public in the form of broad tax cuts.

Others have recommended significant tax changes, such as revamping the U.S. Tax Code and replacing the personal income tax with a national sales tax.

But Clinton, who sends his budget proposals to Congress after his State of the Union address next month, does not intend to offer a broad-based tax cut, and he does not intend to attempt to achieve a balanced budget earlier than planned, Emanuel said.

“Washington should not return to its bad habits of spending money it doesn’t have,” Emanuel said. “That’s what got us into trouble in the first place in the 1980s. One should not be spending a surplus that doesn’t exist yet. That . . . left deficits as far as the eye could see.”

Instead, Clinton will maintain “a very steady policy . . . of investing in education and health care and giving targeted tax cuts to middle-class families,” the presidential advisor said. “And by lifting the deficit off the backs of the economy, the economy has really grown, and the American families are once again working. That’s our approach to it.”

Emanuel credited the administration with “doing responsible things” to reduce the deficit, such as “investing in the American people, targeted tax cuts, opening markets abroad--that’s the economic strategy that’s gotten this economy moving again . . . we’re not going to be reckless and have tax cuts or anything that would actually be things we can’t pay for.”

In 1998, Clinton will propose tax incentives to help pay for child care, Emanuel said.

On another matter, Emanuel said presidential advisor Ira Magaziner’s job at the White House is safe despite a Republican demand that he be fired.

Magaziner headed Clinton’s first-term health-care reform task force, which a federal judge said provided dishonest information to allow closed-door operations. On Saturday, Rep. Bill Archer (R-Texas) demanded Magaziner’s dismissal.

“Ira is a valued member of the White House staff. He’s staying there,” Emanuel said.