Clinton to unveil $1.7 trillion budget plan today Tax breaks for education, slowed-down Medicare, surplus by 2002 sought

February 06, 1997|By Carl M. Cannon and Karen Hosler | Carl M. Cannon and Karen Hosler,SUN NATIONAL STAFF

WASHINGTON -- President Clinton will unveil today a $1.7 trillion budget proposal for the coming year that would grant tax breaks for education, slow the growth of Medicare and other programs and produce a small surplus in the federal budget by 2002.

"We obviously think this is a good budget," Larry Haas, a spokesman for the White House Office of Management and Budget, said last night.

"I've been through three of these, and this one hangs together the best."

Republicans, though, were critical of the level of spending in the budget and said they were disheartened that Clinton's tax cuts would be accompanied by corresponding tax increases. And despite talk of bipartisan cooperation by both sides, it appears that it will be difficult for a Democratic White House and a Republican Congress to agree on how to balance the budget.

"It's going to be tougher than I would have expected," one senior Republican congressional aide said.

Last summer, in a midseason economic review, White House economic projections called for a budget that balanced a year earlier -- with a $25 billion surplus in 2001 -- and that had a $60 billion surplus by 2002.

By contrast, the proposed budget released today would still have a $36 billion deficit in 2001 and squeak across the balanced budget finish line with a $17 billion surplus in 2002.

Given the rosy economic assumptions used by the administration, some independent economists predicted last night that when the Congressional Budget Office "scored" Clinton's budget, the government would still be in the red five years from now.

"I think the president has changed somewhat from last year," Sen. Pete V. Domenici, chairman of the Senate Budget Committee, said in referring to Clinton's pledge that the era of big government was over. "It seems like a lot of government."

Though disappointed with the preliminary information they received last night, Republican criticism was muted. Both sides have vowed to avoid the rancorous political posturing that resulted last time in two partial government shutdowns.

Nevertheless, deep divisions remain between the Republicans and Democrats on virtually everything in the budget except defense spending.

This gulf exists on tax increases, discretionary spending, aide to the poor, how Medicare and Medicaid should be restructured -- and the size, scope and aim of tax cuts.

The main areas of contention:

Taxes: The president is proposing about $98 billion in tax cuts over the next five years.

The highlights include a $10,000 tax deduction or a $1,500 tax credit for college tuition; a tax break for families with children of up to $500 a year; and a proposal to eliminate capital gains taxes on most home sales.

Republicans complain that there is much less to these proposals than meets the eye. Clinton proposes offsetting those cuts by some $80 billion in user fees and excise taxes, such as a 10 percent tax on airline tickets, that are ultimately borne by business or the same middle-class taxpayers he is giving other breaks to.

In addition, Clinton's child tax credit starts at $300 a year, covers children only 13 or younger and is phased out for families making more than $60,000 a year.

The Republican plan includes all children younger than 18, is $500 from the start and covers all families. The Republicans also want much deeper cuts in capital gains. All in all, the Republican plan gives about twice as much in tax breaks to Americans.

Medicaid: Last year, Clinton proposed saving $54 billion in projected Medicaid costs with the Republicans favoring even higher savings. In this year's budget, Clinton has lowered his projected savings to $22 billion over five years -- and is proposing shifting more than half of that savings to aid children of working families without health insurance.

Medicare: Clinton has identified $100 billion in savings over five years and $38 billion more in the sixth year from Medicare, which provides health insurance for the elderly and disabled. Most of it would come from hospitals, doctors and health maintenance organizations. Republicans have wanted about $20 billion more in savings.

Neither side has proposed the kinds of reforms that would make this popular program solvent in the long run.

Welfare: Clinton is proposing adding about $21 billion over five years into the welfare system, additions Republicans believe are largely unnecessary. The bill signed last year by Clinton that ended welfare as a federal entitlement also contained about $55 billion in projected savings.

Clinton is proposing to restore about $18 billion in food stamps and other such aid to immigrants and another $3 billion to implement welfare reform that bring the total to $21 billion. These include a $5,000 tax credit for businesses that hire welfare recipients.

To turn up the heat on the Republicans, the Clinton administration began sending letters to 1 million legal immigrants yesterday telling them that they might soon lose welfare benefits or their Supplemental Security Income checks because they were not citizens.

Each letter starts with this admonition: "Important notice. You may lose your S.S.I."

Pub Date: 2/06/97

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