An Activist Agenda Sweetened by Tax Cuts

For seven years, Bill Clinton has pursued a surprisingly constant list of goals: health care reform, federal funding for education, help for the working poor. But as the nation’s political winds have shifted, Clinton’s means of pursuing his goals have shifted dramatically too--from a promise of active government in 1993 to a focus on a balanced budget and smaller government in 1995 and after.

This week’s State of the Union speech, with its sweeping agenda of 104 initiatives in education, health and other areas, was a return to activist government--an announcement that, with the federal budget in surplus, it is safe for Democrats to talk about spending again.

And it came with an innovative twist: a new reliance on tax cuts, a conservative Republican idea that Clinton has expropriated and turned into a tool for Democratic social priorities.

“Clearly he’s back to an activist agenda,” said Leon E. Panetta, the former California congressman who served as White House chief of staff in Clinton’s first term. “And he always manages to find his way to the center of gravity.

“With growing surpluses, the pressures were going to increase dramatically to have some kind of tax cut,” Panetta said. “So this is a way for Clinton to . . . propose tax cuts that he likes.”

Only a year ago, Clinton and his aides rejected the idea of significant tax cuts--the core of the congressional Republican agenda--as “fiscally irresponsible.” Last year, Clinton vetoed a Republican bill for tax cuts totaling $792 billion over 10 years.

But in his speech Thursday evening, the president embraced the Republican-launched idea of ending the “marriage penalty,” which makes some married couples pay more taxes than if they filed separately, and proposed a list of other tax breaks that add up to an estimated $350 billion over 10 years.

The president’s proposed tax cut is still much smaller than those proposed by Republicans. Texas Gov. George W. Bush, the leading candidate for the GOP presidential nomination, has proposed tax reductions totaling an estimated $1.4 trillion over 10 years.

A Difference in Purpose

But perhaps more important than the difference in size is a key difference in purpose. The main Republican tax cut proposals are “across the board,” meaning that they would go to most taxpayers, including many in higher income brackets. Indeed, the GOP’s “supply-side” wing argues that tax breaks for the well-off are economically useful, because they spur investment and economic growth.

Clinton’s tax reductions, on the other hand, are “targeted,” meaning that they would go only to people who meet particular requirements. For example, Clinton proposed expanding one tax credit to subsidize college tuition for lower- and middle-income families, and another tax credit for businesses to encourage them to build or expand child care facilities.

Even Clinton’s version of “marriage penalty” relief is targeted only to couples who suffer the biggest tax consequences under the current system.

Most tax policy experts do not like targeted tax cuts, because they turn tax law into an instrument of social policy and make the internal revenue code even more complex.

Clinton “likes tax cuts only when they walk, talk, look and act like spending programs,” complained Carol Wait of the Committee for a Responsible Federal Budget, a nonpartisan, but fiscally conservative, group.

But the targeted cuts could give Clinton an important political benefit by enabling him to deflect Republican charges that he wants to keep taxes needlessly high in an age of budget surpluses.

Possibility of Inaction Looms in Congress

“The president is a genius at framing debates so that the questions that shouldn’t be debated are taken off the table,” said William A. Galston, a former Clinton aide who now teaches at the University of Maryland. “We may well have a debate as to what kind of tax cuts are good for the economy and good for society. . . . If the Republicans want to argue that supply-side tax cuts [to higher-income groups] are good for the economy, that’s an argument the president and vice president are glad to engage.”

Indeed, in a political year dominated by hotly contested presidential and congressional elections, there was little sign that Republicans were buying Clinton’s tax prescriptions.

Senate Majority Leader Trent Lott (R-Miss.) praised Clinton on Friday for taking over his opponents’ goal of eliminating the marriage penalty--”He’s good at that,” Lott grinned--but said the GOP plans to stick to its guns.

“Tax cuts are not just about helping one sector or one group. It’s about trying to make sure you make it fairer and that also you’re doing some things that’ll be good for the economy,” Lott said.

And many of Clinton’s own supporters believe that a major collision with Republicans in Congress is still more likely than a grand compromise on taxes, education spending and health care reform.

“One thing unites Republicans and Democrats in Congress this year,” said former Clinton strategist Dick Morris. “None of them want to get anything done. . . . The Republicans have no intention of going into the 2000 election without the tax cut issue and the Democrats have no intention of going into the election without Social Security and Medicare.”

Morris, who coached Clinton into his first great embrace of GOP policies by adopting the goal of a balanced budget in 1995, is more cynical than some, but not by much.

Clinton “is a master of the modern State of the Union speech,” Panetta said. “He touches on all the right themes, introduces all the right people, uses all the right props. . . . But that’s not to say any of this is going to get done.

“The Republicans are between a rock and a hard place: They don’t want to add to Clinton’s legacy but they know they’ve got to compromise to get some things done before the election,” he said. “So I think there’s a good chance you’ll see a limited list of accomplishments. . . .

“In the end, Clinton’s toughest obstacle may not be the Republicans, but the [House] Democrats, who clearly want to run against a do-nothing Congress,” Panetta said.

“But part of this was Clinton laying out a marker,” he added. “He may not accomplish it all. But he wants the American people to remember what he was about . . . and to know that those who do accomplish it later will be carrying out his legacy.”

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Times staff writer Art Pine contributed to this report.