Republicans vow to give spending cuts priority

WASHINGTON -- They brandish the banner of a reborn Reagan revolution, but congressional Republicans say they are determined not to make the mistake the former president did in 1981: cutting taxes without also cutting spending enough to spare the government from a pool of red ink.

In response to Democratic criticism that the GOP's new round of proposed tax cuts would swell the budget deficit just as President Ronald Reagan's did, House Republicans are determined to trim government spending before making good on the tax breaks they promised in their "Contract with America."

"We're going to take the steps necessary to assure the American people, and Wall Street, and [Federal Reserve Board Chairman] Alan Greenspan . . . that all the tax cuts we approve are paid for and will not increase the deficit in any way, shape or form," Richard May, the incoming chief of staff for the House Budget Committee, said this week.

Those steps will include rarely used procedures to reopen the budget already approved by Congress last year to take back appropriations and to tighten future spending ceilings. Mr. May said the goal was to produce at least $200 billion in savings over five years in a plan ready for a House vote by the end of February.

The savings would then be symbolically "banked" to finance the $200 billion worth of middle-class and business tax cuts House Republicans promised to vote on during the first 100 days of the new Congress.

Chief among those tax cuts is a $500-per-child income-tax credit for families, and a reduction in the tax on capital gains.

Republican leaders have not yet determined how specific the corresponding spending cuts will be. Acting this fast, the legislators might only be able to propose cuts in broad categories of spending, with details to be worked out later.

No spending cuts will actually take effect unless approved by the Senate and signed into law by President Clinton. The Republican senators did not commit themselves to the "Contract with America," and they are not eager to take up spending cuts without the sweetener of tax cuts thrown in, according to GOP Senate aides.

In fact, the entire batch of tax and spending cuts will ultimately be put together in a single bill that probably won't reach the Senate floor until summer at the earliest.

Even so, House leaders argue that they will have proved, through their early votes on spending cuts, that they are willing to make the tough decisions needed to cut taxes in a responsible way.

"We're not going to give you the tax cuts today and say we'll pay for them tomorrow," Rep. John R. Kasich, the Ohio Republican who will become chairman of the House Budget Committee, said in a television interview. "We're going to do something that politicians never did in this town: We're going to keep our word."

Reagan's experience

Mr. Kasich and his Republican colleagues are sensitive on this point because of the experience President Reagan encountered the early 1980s, when he, too, came into office with a conservative mandate to cut taxes and spending.

The Congress of that period -- led by Democrats in the House and Republicans in the Senate -- was more than willing to go along with tax cuts, but reluctant to approve Mr. Reagan's companion proposals for reducing government spending.

In 1981, the lawmakers approved a tax-cut package estimated to reduce government revenue by $750 billion over five years without any spending cuts. The next year, when the recession reduced government revenue even further, Mr. Reagan agreed to raise taxes to make up for the shortfall. The president thought he had a deal with Congress to match each dollar of tax increases with three dollars worth of spending cuts.

As it turned out, Congress approved $100 billion worth of higher taxes over three years but only $17.5 billion worth of spending cuts.

The budget deficit ballooned to $208 billion in 1983, from $82 billion in 1982.

"Fool me once, shame on you; fool me twice, shame on me," Sen. Bob Packwood, a Republican from Oregon who will become chairman of the Senate Finance Committee, said after recounting the tale of "poor old Ronald Reagan" in a television interview earlier this week. "I'm not even going to consider tax cuts we're going to do until I see spending cuts that will match them."

Piecemeal approach

Some budget analysts for outside watch groups are nervous about what appears to be a piecemeal approach to fiscal policy. "I understand the House Republicans are very concerned about scheduling a series of votes to make it clear they are fulfilling their contract, but I'm having trouble with this notion of approaching the budget in pieces," said Carol Cox Wait of the Committee for a Responsible Federal Budget.

Ms. Wait added, "I've been around so long, I have seen many opportunities squandered."