Bush budget already faces tough battle in Congress

January 26, 1992|By Gilbert A. Lewthwaite | Gilbert A. Lewthwaite,Washington Bureau of The Sun

WASHINGTON -- While President Bush will propose a way to economic recovery in his State of the Union and budget messages this week, it will be Congress that plots the nation's actual escape route from hard times in a budget process that is shaping up as an explosive opening to election year.

Major elements of Mr. Bush's long-awaited growth package are likely to be short-lived as a feisty Democratic-led legislature works the plan over.

Mr. Bush's economic blueprint will be measured against Capitol Hill's own ideas of how to end the Great Recession, and it is likely to be found wanting.

"I think the president's package will be dead by the end of the week and forgotten about. Very few elements will survive," said Scott Hodge, a federal budget analyst at the conservative Heritage Foundation.

The Democrats in Congress are "highly combative, incredibly politically driven," he said. "There will be many, many attempts over the next few months to embarrass Bush in various fashions."

Mr. Bush's tax proposals are expected to be less generous to the middle class but more generous to corporations and investors than most Democrats are ready to accept.

The $50 billion in new defense cuts over the next five years that the president recently talked about is way below what Democrats want to take from the post-Cold War Pentagon. Senate Majority Leader George J. Mitchell, D-Maine, has proposed a recovery plan based on $100 billion in new defense savings over the same period.

Mr. Bush's expected tax credit for health insurance is unlikely to impress Democrats bent on a universal health care system. And the president will probably balk at Democratic interest in a new form of revenue-sharing to channel emergency aid to hard-pressed states and local governments.

Sen. Paul S. Sarbanes, the Maryland Democrat who chairs the Joint Economic Committee, proposes a local government aid package in the recovery plan that he is co-author of with Sen. Jim Sasser, D-Tenn., chairman of the Budget Committee.

"The Democrats talk about the need for both public and private investment," Mr. Sarbanes said. "A lot of Republicans don't talk about the need for public investment at all."

The senator declined to comment on any of the elements reportedly included in Mr. Bush's program, saying: "You don't know whether they are floating trial balloons, going down a diversionary path."

Dozens of economic recovery proposals have been floated in Congress in recent weeks, but as one aide on the tax-originating House Ways and Means Committee put it: "The only proposal that matters is the one from the White House, and that isn't in the hopper yet. Everything else is commentary.

"There is no consensus on what needs to be done," the aide said. "Our members are very aware you can do a lot of things to make things worse. You don't know you can make things better, but you do know that you can make things worse."

The White House has been even more secretive than usual this year about Mr. Bush's budget plans, leaving the nation and Congress to wonder what a president, who, as recently as last fall, was asserting that there was no recession, is now going to do about the longest economic downturn since World War II.

Mr. Bush, according to leaked reports, is looking toward some form of tax relief for the middle class, along with a capital gains tax cut for investors, and accelerated depreciation and expanded tax credits for business. He is also expected to announce the new defense savings, and to declare a 90-day moratorium on new government regulation.

Other possibilities: a ceiling on Medicaid payments, tax credits for first-time home-buyers and health insurance, and a new federal job-training program.

Jeff Faux, president of the Economic Policy Institute, said: "I don't think a lot [of the Bush program] is going to survive. You have Bush vulnerable, you might even say on the run. We are probably going to see the White House fumble for at least the next two months, trying to find a path it feels comfortable with.

"You have got a situation where the Democrats can make some gains here, but they have taken opportunities to blow it in the past, and I don't know why we should expect they won't do it this time."

The Heritage Foundation's Mr. Hodge, reviewing congressional proposals, said: "What they have in common with the Bush budget is, by and large, none of them have a long-term vision. They are all very short-term political responses."

Broadly, the Democrats favor a tax break for the middle-class, paid for by raising taxes on the rich, and public investment, including emergency aid to state and local governments, financed by defense savings.

The Republicans generally tend to rely more on fiscal stimulus, including wealthy investors and corporations as well as families in their tax-relief proposals, which would be paid for out of the peace dividend. They generally oppose public spending programs.

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