Clinton Targets Middle Class With Budget Initiatives

Taking full political advantage of huge projected surpluses, President Clinton on Monday sent Congress a $1.8-trillion federal budget laced with initiatives aimed squarely at appealing to middle-class voters.

Clinton seasoned his fiscal 2001 blueprint with new money for popular spending programs--a hefty increase for Medicare and smaller amounts in other areas--and sprinkled it with carefully targeted tax cuts for education and retirement. His budget would wipe out in 13 years a national debt that has been building since Andrew Jackson was president.

As a political manifesto, the budget spells out the vision of an activist national government shared by Clinton and Vice President Al Gore, who hopes to move into the White House himself next year. Their plan would preempt much of the Republicans’ agenda for tax and spending cuts.

As a fiscal blueprint, the budget includes modest funding increases for education, military pay and law enforcement. It features a handful of limited environmental initiatives. And for the less fortunate, it makes room for more spending for job training, child care and the Head Start preschool program.

“It is a balanced budget with a balanced approach to our national priorities,” proclaimed an upbeat Clinton. “It maintains our fiscal discipline, pays down the debt, extends the life of Social Security and Medicare and invests in our families and our future.”

In fact, the budget is more than balanced. It shows a $184-billion surplus in the fiscal year that begins Oct. 1. Almost all the surplus would come from the Social Security program. Clinton would use the annual surpluses in that program to pay down the national debt held by the public, now about $3.5 trillion.

In addition, Clinton projected a $746-billion surplus in the government’s non-Social Security accounts over the next 10 years. He would use this to pay for his spending initiatives and modest tax cuts.

The Republicans who control Congress lashed out at the administration for pandering to Democratic constituencies, although they may find the political appeal of Clinton’s budget difficult to ignore.

Republicans Blast White House Plan

House Majority Leader Dick Armey of Texas labeled the White House budget “a spending smorgasbord full of special-interest handouts. The goal of the Clinton-Gore budget seems to be improving their chances in the fall elections--not improving the nation’s well-being.”

House Speaker J. Dennis Hastert of Illinois argued that Clinton is trying to have it both ways by pledging to eliminate debt while pushing the federal government into new areas. “How can we pay down the debt with a budget that substantially expands the size and scope of the federal government?” the Republican leader asked.

Democrats had a ready answer: that the Clinton budget would reserve its spending increases for carefully selected areas. The administration would plow more than half of the non-Social Security surplus into the financially beleaguered Medicare program, covering prescription drug costs for the first time and prolonging the program’s solvency 10 more years to 2025.

“What is it that [the Republicans] oppose?” asked Sen. Frank R. Lautenberg (D-N.J.). “Prescription drug coverage? Funding for school modernization? Tax breaks for child care?”

Administration officials acknowledged Monday that they owe much of their good budget fortune to factors largely outside their control: the blossoming of new information technologies, increased competitiveness of America’s private sector and the interest-rate policies of the Federal Reserve.

But they argued that their controversial 1993 tax hikes and subsequent spending restraint played a crucial role. “While ultimately credit goes to American workers, American businesses and the force of information technology, I don’t believe we would have unlocked that energy without a decisive change in our country’s fiscal policies,” said Treasury Secretary Lawrence Summers.

The White House proposed some of the following uses of the black-ink windfall:

Education: The Clinton budget focuses on subjects likely to resonate with a wide spectrum of Americans: helping families pay for college, getting better-qualified teachers into classrooms, making troubled schools more accountable for improvement, reducing class sizes for young students and expanding the popular Head Start preschool program for disadvantaged children.

With a total of $40 billion in discretionary spending appropriations requested, Clinton’s budget would result in a 13% increase in such spending over last year, the largest in Education Department history. Under Clinton, federal spending for education has jumped 55% since 1996.

“Education, in our competitive global economy, has become the dividing line between those who are able to move ahead and those who lag behind,” Clinton said in his budget message to Congress.

Congressional Republicans are not likely to cut total education spending. After all, they assented to the huge increases over the last four years.

But sharp struggles are expected over spending priorities and details of specific programs--between Congress and the White House and between House and Senate Republicans, who have often disagreed in the past.

Signaling the coming struggle, Rep. William F. Goodling (R-Pa.), chairman of the House Education and Work Force Committee, labeled Clinton’s proposals “disappointing” and called for more freedom for state and local officials to decide on education spending priorities.

The education budget calls for spending $1.75 billion, up $450 million from this fiscal year, to help schools recruit and train new teachers and reduce class sizes in the early grades. It calls for doubling, to $1 billion, the amount of money available to support after-school and summer-school programs.

Defense: In an area where Democrats historically have been vulnerable to GOP attack, Clinton proposed spending $277.5 billion to modernize weapons, pump up the missile defense program, improve pay and benefits, and cover costs from the Kosovo war and other overseas deployments.

Increases in these areas would be offset by cuts in other defense programs, leaving total outlays the same or slightly smaller than last year in constant dollars.

Congressional Republicans are expected to add several billion dollars more to Clinton’s defense plan. Yet the blueprint will help blunt the expected GOP criticism that the administration has short-changed missile defense, the troops’ needs and procurement.

Missile Defense Would Get Boost

With the president scheduled to decide this summer whether to field a national missile defense system, the budget proposes to add $2.3 billion for the program in the coming fiscal year. That would raise five-year spending for national missile defense to $10.4 billion, enough to build a 100-missile system that the Pentagon believes would be sufficient to shield all 50 states from a small-scale attack.

The budget also would add pay raises of 3.7% for the military, more spending for military health care and $5 billion to house personnel who live off base. The Pentagon hopes that these expenditures would help overcome its mounting problems with recruitment and retention.

The Clinton spending plan would hike the weapon procurement budget to $60 billion, an increase of more than 40% since fiscal 1998.

One budget decision touches an important Southern California defense operation. The Air Force has decided to reduce its fiscal 2001 purchase of the huge C-17 cargo planes built by Boeing’s McDonnell Douglas unit in Long Beach, from 15 to 12. The other three are to be purchased in 2003. McDonnell Douglas, which has 8,000 people working on the project in Long Beach, said that the extended timetable should not affect work force levels.

Energy: The Energy Department proposed a $100-million aid and research program to help Russia safeguard nuclear materials from domestic reactors that could be used to make atomic weapons. In exchange, Russia agreed to stop making plutonium--a key ingredient in nuclear explosives--out of fuel from its 29 civilian reactors. The United States has not processed such fuel since 1978.

Officials said that the proposed initiative is part of a broader U.S. effort, launched in 1992, that aims to end Russia’s production of fissile materials and to secure and reduce nuclear stockpiles. Past efforts have focused, in part, on stopping the loss of nuclear materials, as well as Russian scientists, to Iran, Iraq, North Korea and other nations that seek to build nuclear weapons.

Nearly half the budget money, $45 million, would be spent to design and build a dry storage facility for spent fuel from Russian reactors. Money also would be used to provide better security and accounting for existing plutonium stocks.

Other funds would go to joint research to create technological barriers to reprocessing spent fuel as well as for collaboration on long-term solutions to the growing accumulation of plutonium-bearing spent nuclear fuel.

In addition, the money would help implement plans to close Russia’s nuclear warhead production facilities at Avangard and Penza-19, including financing for non-military projects to support displaced workers.

Rep. Ellen O. Tauscher (D-Pleasanton) praised the energy initiative as “showing a clear resolve to global nonproliferation.”

Environment: Clinton’s budget proposes $42.5 billion for environment-related programs, up $4.1 billion, or 11%, from the $38.4 billion spent in fiscal 2000.

The highlight of the president’s environmental package is a proposal to create a $1.4-billion permanent “Lands Legacy” fund to enable the federal government to acquire land and protect it from environmental degradation.

The administration’s proposal would incorporate current land acquisition programs and would increase total spending in that category by $673 million in fiscal 2001, with about one-third of the total going to coastal areas, such as wetlands and national seashores.

Farmers a Focus of Clinton Plan

Clinton also is seeking to provide an extra $1.2 billion to finance voluntary programs to help farmers protect water quality and wildlife areas and $600 million in grants for family farmers who adopt plans to curb erosion and preserve water standards.

Labor and the work force: In line with Clinton’s new effort to mitigate the adverse effects of the global economy, the budget seeks an extra $181 million to help provide training and job search assistance to workers who have been displaced by foreign competition, changing technology, defense cutbacks and other developments outside their control.

The administration also is seeking $255 million for a new “Fathers Work/Families Win” program that would finance education and job-training for fathers who are unemployed and behind on court-ordered child-support payments.

Foreign policy: With the proposed $22.8-billion State Department budget, Secretary of State Madeleine Albright said that the agency would promote the global spread of democracy while combating transnational threats including drugs, terrorism and AIDS.

Colombia would receive $256 million to fight its narcotics trade, which supplies an estimated 80% of the cocaine in the United States. The funding is part of a two-year, $1.27-billion package that also seeks to strengthen democracy and eradicate guerrilla violence and human rights abuses in the country.

The new budget also would provide Nigeria, Indonesia and Ukraine with $100 million each to help them move toward more democratic governments.

More than $1 billion is earmarked for construction and maintenance of U.S. embassies as well as security upgrades, including the hiring of more than 150 additional security personnel.

Spending for global educational programs also would be up, with HIV/AIDS awareness receiving an additional $100 million and international family planning an added $169 million. Efforts would focus on Africa, where AIDS is now the leading cause of death.

Crime: The Justice Department is seeking a $23.4-billion package weighted toward combating drugs and guns, putting more police officers on the street and providing more prison beds.

The request would be $1.83 billion, or more than 8%, above the current budget year’s numbers.

With crime dropping nationwide for a record seventh straight year, Deputy Atty. Gen. Eric Holder said that Justice Department officials want to continue along a proven path.

Major spending increases would include: an additional $216 million for combating gun violence through improved ballistics identification, expanded prosecution and other measures; $616 million for hiring more local police and prosecutors; $439 million for catching illegal immigrants; $358 million for fighting high-tech crime and $120 million for expanding counter-terrorism.

But in the contentious area of tobacco litigation, Justice Department officials appear to have learned their lesson.

Last year the Clinton administration sought $20 million to pursue a federal lawsuit against the major tobacco companies, but the move was rebuffed by Congress. Monday’s request includes about $1.8 million for tobacco litigation at the Justice Department--about the same level as the current budget.

Health care: More than half of the non-Social Security budget surplus--roughly $550 billion over 10 years--would be spent to shore up existing health care programs and expand health benefits for the elderly and the working poor.

The biggest single spending item would be $299 billion to shore up Medicare, the government’s health insurance program that covers 39 million elderly and disabled.

The program is projected to run out of money in 2014, but, under Clinton’s proposal, it would be solvent until 2025.

Clinton would augment the program’s benefits so that it covers prescription drugs and some additional preventive care. Under his plan, as much as $2,500 worth of drugs would be paid for by the government once the benefit is fully phased in. He also would set aside a fund of $35 billion that would be used to cover the cost of a larger drug benefit for those elderly and disabled with extremely high drug bills.

Poor Children Would Receive Aid

For the children of the working poor and their parents, Clinton proposes spending an additional $76 billion to expand the existing state children’s health insurance program so that it reaches more children and makes eligible parents whose incomes are up to 200% of poverty, about $34,000.

A third expensive proposal is a $3,000 tax credit to help the disabled elderly and their families offset costs of care at home.

These far-reaching proposals are unlikely to be enacted this year. However, the concept of a prescription drug benefit in particular has attracted support from Republicans and pharmaceutical companies, although both would like a somewhat more modest benefit than the one proposed by Clinton.

Medical research: As part of a general trend toward greater spending on scientific and medical research, the Centers for Disease Control and Prevention would get a 24% increase in funding for work on new infectious diseases, including money for a nationwide database to help federal watchdogs spot outbreaks more quickly.

And, in recognition of new problems emerging in the Information Age, the Food and Drug Administration would receive $10 million in new money to deal with Internet sales of prescription drugs.

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* MONEY FOR BUSES

Budget includes surprise request for $50 million for L.A. County transit district. A16

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Times staff writers Ricardo Alonso-Zaldivar, Bob Drogin, Christine Frey, Janet Hook, Eric Lichtblau, Art Pine, Paul Richter and Richard Simon contributed to this story.

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BUDGET HIGHLIGHTS

Highlights of President Clinton’s proposal:

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Spending

The president’s $1.8-trillion proposal for fiscal year 2001 would be 2.5% more than the $1.79 trillion to be spent this year.

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Taxes

The budget includes establishing government-subsidized retirement savings accounts; alleviating the ?marriage penalty? that forces many two-income married couples to pay higher taxes; expanding the earned-income tax credit for the working poor; deducting up to $10,000 in college expenses; and creating a $3,000 tax credit for long-term health care. To defray the cost, Clinton would raise other levies by $181 billion.

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Defense

A proposed $277.5-billion Pentagon budget would give a high priority to weapons and boost military pay.

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National debt

Clinton seeks to eliminate the publicly held $3.5 trillion portion of the $5.7 trillion national debt by 2013. The remaining $2-trillion debt is money the government owes its own Social Security and other trust funds.

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Health

Clinton proposes earmarking $91 billion over 10 years to provide health insurance to 5 million of the estimated 44 million Americans not covered by health insurance, in part by covering the parents of children eligible for Medicaid and states’ Children’s Health Insurance programs. He proposes $168 billion for a new program to help the elderly pay drug costs over 10 years.

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Education

Clinton’s nearly $40-billion education budget plan, roughly 13% more than last year’s proposal, would give a high priority to wiring classrooms for the Internet, hiring more teachers, fixing crumbling schoolhouses and making college more affordable.

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Environment Clinton?s plan would for the first time create a permanent dedicated fund to enable the federal government to acquire ?national treasures? and other environmentally sensitive lands.

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Source: Times staff and wire reports; compiled by SUNNY KAPLAN/Los Angeles Times Los Angeles Times

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Shifting Priorities

How each federal dollar was spent when President Clinton took office, and how he has proposed to allocate spending in 2001.

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Source: Office of Management and the Budget

Compiled by SUNNY KAPLAN / Los Angeles Times