Senate foes open pitched battle on balancing budget

WASHINGTON -- The opening bell sounded yesterday in what is likely be a high-pitched battle over how to balance the federal budget, with Republicans and Democrats squaring off over the defining issues of Medicare and tax cuts.

"We will have the debate so many of us have said we want," Sen. Pete V. Domenici, chairman of the Senate Budget Committee, declared, pounding his gavel to call his colleagues to order to take up what he called the first fiscal blueprint in three decades that will result in a balanced budget.

"America's future, for young and old alike, will be shaped by the outcome," the New Mexico Republican said in a huge hearing room packed with lobbyists and spectators.

Mr. Domenici expects to win his committee's approval this week of a seven-year spending plan that would slow the growth in Medicare spending to 7.1 percent a year, from 10 percent. Such a slowdown in the health care program for the elderly would save a projected $250 billion, about one-fourth of the $1 trillion needed to balance the budget by the Republican target year of 2002.

Without some changes, part of the Medicare program would go broke by 2002. But Republicans are also planning broad changes to keep Medicare from consuming an ever-larger share of the federal budget.

Those savings would mean higher costs and fewer benefits for the elderly Medicare beneficiaries, and lower payments for hospitals and doctors. But Mr. Domenici said the savings would help reduce what he called "a crushing tax burden on America's young people just starting out in life."

Among the long-range steps under consideration is to raise the eligibility age for Medicare to 67, from 65, in the next century, in tandem with Social Security. Rep. Bill Thomas, chairman of the ++ House Ways and Means health subcommittee, made that suggestion yesterday. He said it would be "crazy" to allow people to collect Medicare two years before they can collect full Social Security benefits.

Mr. Thomas also urged that Medicare premiums be determined according to the income of the beneficiaries so that wealthier Americans would have to pay a higher cost for doctor bills.

Democrats on the Budget Committee contended yesterday that Medicare, as well as other domestic spending -- ranging from transportation and community development to nutrition and education -- is being savaged in the cause of granting tax breaks to the wealthy.

"What kind of legacy is it for the next generation if a student is denied an education because of cutbacks in the student loan program?" asked Sen. Paul S. Sarbanes, a Maryland Democrat. "It is very important as we make these judgments that we invest in the future strength of this country. Draconian cuts on the spending side in order to make room for a tax cut is not fair."

The House has already passed tax cuts totaling about $350 billion over seven years, highlighted by a $500-per-child tax credit for families and a reduction in the tax rate on capital gains. Republicans say such tax cuts would help create jobs and benefit middle-class families.

Mr. Domenici, who has been in the forefront of the deficit-cutting wars for more than a decade, did not make room in his budget plan for the $189 billion worth of tax cuts already approved by the House.

"It's not that I'm opposed to cutting taxes," he told the committee. "It's just that I believe our first responsibility is to get to a balanced budget."

But Sen. Phil Gramm of Texas, a Republican candidate for president, announced that he would fight for tax cuts on the Senate floor and propose additional spending cuts to offset them.

"I want to limit the growth of government even more so we can let working people have more of their own money to spend," he said.

Mr. Gramm is likely to find plenty of support for his position on the Senate floor, particularly from Majority Leader Bob Dole of Kansas, another GOP candidate for president.

The budget approval process that begins this week is expected to continue well into the fall.

The House and Senate committees will each approve a broad outline for spending that will be voted upon by the full House and full Senate before Memorial Day. Differences between the ++ two versions will be resolved in June, with final approval due in July. President Clinton's approval is not required.

Meanwhile, other congressional committees will begin making the specific spending and tax decisions required to meet targets set in the budget blueprint. One or two huge bills, encompassing all these decisions, are due to be voted on in September. Those would be subject to presidential veto.

Except for the tax cuts, the House and Senate budget plans are similar -- both targeting Medicare to achieve the largest chunk of savings.

The second-largest share -- $160 billion in Mr. Domenici's blueprint -- would come from Medicaid, the health care program for the poor, which Republicans plan to turn over to the states to run.

Mr. Domenici's budget blueprint also calls for squeezing other automatic benefits programs, such as agriculture subsidies -- although he has modified his plan after complaints from farm-state senators.

General government programs, like education, housing, community development, air traffic control and environmental clean-up, would be cut to about 30 percent below their current levels, a total of about $200 billion in savings.

Sen. James Exon of Nebraska, the senior Democrat on the Budget Committee, warned yesterday that the Republican leaders are wasting a historic opportunity to win public support for balancing the budget by confusing the issue with tax cuts.

"I approach this task with a disappointed heart," he said.