Next budget to include very little increase in domestic 'investments'

December 21, 1993|By Los Angeles Times

WASHINGTON -- President Clinton began scaling back federal spending proposals yesterday as the White House acknowledged that its next budget will provide little or no growth in domestic "investments" such as public works, job training, education, and children's programs that were once at the heart of Mr. Clinton's agenda.

Launching a weeklong process of completing his 1995 budget, Mr. Clinton spent more than three hours yesterday in critical meetings with top aides bearing grim fiscal projections. Although final decisions will not be made until later this week, officials suggest that Mr. Clinton is siding with deficit hawks in his administration who want to force Cabinet agencies to sharply reduce the scope of their initiatives in order to comply with congressional spending limits.

When he makes his decisions, Mr. Clinton will be ending weeks of internal squabbling between White House budget director Leon Panetta and the administration's agency heads, who have rebelled against Mr. Panetta's orders to bring their proposed budgets in line with lower spending ceilings imposed by Congress.

"There have been fights over housing programs, fights over nutrition programs -- there are no sacred programs getting exempted from cuts by the White House," said one lobbyist familiar with the process.

Except for Treasury Secretary Lloyd Bentsen, the Cabinet secretaries who objected previously to the proposed cuts were excluded from yesterday's deliberations, which were dominated by Mr. Panetta and National Economic Council Chairman Robert Rubin. Indeed, this week's budget sessions seem certain to enhance Mr. Panetta's power by signaling to the rest of the administration that the president is committed to making deficit reduction his top priority, despite the impact on the rest of his domestic agenda.

"The [budget cuts] are a matter of concern, but we are putting an absolute emphasis on meeting the [spending] targets and cutting that deficit substantially, and it will not be easy bringing that about," Mr. Bentsen said yesterday.

Speaking to reporters, Mr. Bentsen acknowledged that the administration's yearlong shift in emphasis toward deficit reduction and away from pro-growth spending programs means that Washington must rely almost completely on the private sector's response to lower interest rates to fuel the economy.

Administration officials acknowledge that cutting the budget actually dampens economic activity unless it brings about the kind of rapid reductions in interest rates that have occurred this year.

But Laura D'Andrea Tyson, chairwoman of the Council of Economic Advisers, defended the administration's willingness to make deficit reduction the focus of its economic policies, arguing that the acceleration in economic growth in the last few months is due almost entirely to the rapid reduction in interest rates that came as a result of Mr. Clinton's economic plan. That fact underscores the need for the administration to not back off on its commitment to deficit reduction, she added.

"We have had to make some very tough choices in a quite inhospitable economic environment," said Ms. Tyson. ". . . I see the response of the financial markets . . . as a vote of confidence," in the administration's decision to focus on deficit reduction, she added.

Yet as the president and his advisers begin making final decisions on next year's spending plan, they are confronted with new figures suggesting they will be able to devote less money to domestic needs than did their Republican predecessors.

A new congressional study shows that domestic spending actually will decline under Mr. Clinton, when adjusted for inflation. In fact, roughly half of the gains in domestic programs achieved during the Bush administration will be given up during Mr. Clinton's first term, according to projections by the House Democratic Study Group.

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