Citing a Record Budget Surplus, Clinton Offers Congress a Deal

President Clinton announced Monday that the government’s anticipated budget surplus will exceed projections by almost $2 trillion over the next decade--a cornucopia of cash that he proposed using for both the Medicare prescription drug benefit he has championed and a tax cut Republicans want for married couples.

Clinton offered the trade-off as a way to break an impasse on Capitol Hill that has seemed likely to keep both Republicans and Democrats from achieving their top policy priorities this year.

“This is a proposal for true compromise that asks each party to accept some of the positions of the other party in the name of progress,” he said.

But his plan got a chilly reception from Republican congressional leaders, who viewed it as a political maneuver that would provide too little tax relief and too much domestic spending.

“I would not be interested in a raw deal where American families get just a few more pennies in tax relief and President Clinton gets a trillion-dollar blank check for more government spending,” said House Ways and Means Committee chairman Bill Archer (R-Texas).

The byplay between the two sides was the latest demonstration of just how difficult it will be to enact any major domestic policy changes in this election year. Even record projected surpluses of a once-unimaginable scope may not be enough lubricant to grease the wheels of compromise when mistrust is rampant and each party seems to see political advantage in blaming the other for stalling popular legislation.

But the new surplus estimates also underscored the enormous stakes involved in the coming presidential and congressional elections, in which a central issue dividing the two parties is the question of how to allocate the fruits of the nation’s prosperity.

The surplus windfall had been widely expected by budget analysts, but Clinton’s announcement officially confirmed its breathtaking magnitude. His Office of Management and Budget now forecasts that a $1.9-trillion surplus will pile up over the next 10 years--more than double the $746-billion figure projected just four months ago.

White House officials attributed the vast change to the unexpected strength of the economy over the last six months, increased federal tax collections and more-optimistic projections of economic growth over the next decade.

In revising his proposal for how that burgeoning surplus should be used, Clinton said that he wants to pay off the national debt by 2012--a year earlier than he had once proposed.

He continued to insist--and the Republicans in Congress agree--that all surpluses attributable to Social Security be fenced off and used only for that program, which will face a strain as members of the baby boom generation begin to retire.

Clinton also called on Republicans to accept a proposal--which has been promoted by Vice President Al Gore on the presidential campaign trail--to fence off surpluses in the Medicare trust fund to be used only for that health care program. And the president proposed earmarking $500 billion over 10 years for a reserve fund to be spent after the next election for debt reduction, tax cuts or other priorities.

But for now, Clinton argued, the time is ripe for a compromise to allow enactment this year of legislation to help Medicare beneficiaries pay for prescription drugs as well as a bill to eliminate the so-called marriage penalty--the quirk of the tax code that forces many married couples to pay more income tax than they would if they filed as single taxpayers.

Clinton said that he would be willing to accept a marriage penalty cut of $250 billion over 10 years--more than the $43 billion cut he earlier endorsed--if Republicans would agree to a $250-billion Medicare prescription drug program designed to his liking.

Those two issues are at the center of partisan maneuvering in Congress, even though both enjoy broad bipartisan support--at least in principle. Politicians of both parties are loathe to be seen as blocking either initiative as the November election nears because they are supported by key political constituencies. But the two sides have had little luck agreeing on details. Republicans want to cut the marriage penalty more than congressional Democrats, who in turn want a more sweeping prescription drug program than the GOP.

The new budget estimates were issued as congressional debate over Medicare and taxes reaches a crucial juncture.

House Republicans plan to send Clinton a marriage penalty bill before the end of July. And the Medicare debate may come to a head this week in the House, where Republicans are hoping to neutralize the Democratic advantage on the issue by passing their own version of a prescription drug benefit for the elderly.

The GOP bill would provide government subsidies to private insurance companies that provide prescription drug coverage for Medicare beneficiaries. The program would cover only low-income elderly people, as well as others who face extremely high drug costs, and would cost an estimated $158 billion over 10 years. The more expensive Democratic plan would cover more people.

GOP strategists argued that Clinton’s proposal is a bad one for the GOP because he is simply looking for something in exchange for signing a marriage penalty bill--which Republicans believe he would be hard pressed to veto.

“He knows that a marriage penalty is going to come to his desk,” said Michele Davis, spokeswoman for House Majority Leader Dick Armey (R-Texas). “He’s trying to muddy that clear picture.”

The two major-party candidates vying to succeed Clinton each welcomed the new surplus projections through the prisms of their warring campaigns.

Ari Fleischer, a spokesman for presumed GOP presidential nominee George W. Bush, said the estimates validate Bush’s claim that there would be plenty of room in the federal budget for his ambitious plan to cut taxes and still have money for other priorities.

The new report “shows that [Bush’s] plans to cut taxes, pay down debt, reform Social Security and increase spending for essential priorities like education, health and defense all fit within government revenue estimates,” Fleischer said.

But Chris Lehane, a spokesman for Gore, the presumed Democratic nominee, said that even with a bigger surplus “it is clear that Bush will not be able to pay for all of his tax cut and spending proposals.”

“George W. Bush would spend more than the projected surplus on his tax cut for the rich, his Social Security privatization plan, his Star Wars missile program and other spending,” Lehane said.

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The Growing Surplus

New federal budget surplus estimates over the next decade are almost a trillion dollars more than estimates announced last February:

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Source: Office of Management and Budget