Budget surplus has White House weighing tax cuts Clinton favors trims aimed at middle class, presidential aide says

1st year in black since '70

December 29, 1997|By LOS ANGELES TIMES

WASHINGTON -- President Clinton has not ruled out an across-the-board tax cut, called for by some Republican leaders, but he continues to favor trims aimed at the middle class, a senior White House aide said yesterday.

With the federal budget showing a 12-month surplus for the first time in nearly three decades, Clinton prefers a targeted and limited approach to tax cuts -- one that does not assume the budget is under control or that any surplus should automatically be converted into tax cuts, presidential assistant Rahm Emanuel said.

Yet Clinton would not necessarily veto a general tax cut that reaches across all income levels, Emanuel said.

"If others have an approach, we'd love to see it," he said. But, he added, "Where are they going to pay for" tax cuts? "Are they talking about cuts in education? Are they talking about cuts in health care? Are they talking about cuts in senior programs?"

Although Republicans have not been talking about those steps, Emanuel's comments indicate that the Clinton administration is preparing for a robust and wide-ranging debate with Republicans in 1998 over federal spending decisions in a new era of balanced budgets.

That debate has been emerging swiftly this month after word that the federal budget had run a surplus for a 12-month period for the first time since 1970.

When Clinton took office in 1993, the annual deficit was $300 billion and was projected to rise to $570 billion by 2002, Emanuel said. A five-year White House budget deal with the Republican-led Congress last year called for gradual elimination of the deficit by 2002.

But the vigorous U.S. economy has closed the gap far sooner than expected. Some analysts have predicted a surplus of as much as $40 billion in the current fiscal year, which runs through Sept. 30.

Some GOP leaders, including House Speaker Newt Gingrich of Georgia, have called upon Clinton to offer a balanced budget in 1998, three years ahead of the five-year plan. Gingrich has also suggested returning the surplus dollars to the public in the form of tax cuts.

Others have recommended significant tax changes, such as revamping the tax code and replacing the personal income tax with a national sales tax.

Clinton, who sends his budget proposals to Congress after his State of the Union address next month, does not intend to offer a broad-based tax cut, nor attempt to achieve a balanced budget earlier than planned, Emanuel said yesterday on NBC-TV's "Meet the Press."

"Washington should not return to its bad habits of spending money it doesn't have," Emanuel said. "That's what got us into trouble in the first place in the 1980s. One should not be spending a surplus that doesn't exist yet. That left deficits as far as the eye could see."

Instead, Clinton will maintain "a very steady policy of investing in education and health care and giving targeted tax cuts to middle-class families," he said. "And by lifting the deficit off the back of the economy, the economy has really grown and the American families are once again working. That's our approach to it."

In 1998, Clinton will propose tax incentives to help pay for child care, Emanuel said.

On another matter, Emanuel said presidential adviser Ira Magaziner's job at the White House is secure despite a Republican demand that he be fired.

Magaziner headed Clinton's first-term health care task force, which a federal judge said provided dishonest information to allow secret operations. On Saturday, Rep. Bill Archer, a Texas Republican, demanded his dismissal.

That won't happen, Emanuel said. "Ira is a valued member of the White House staff. He's staying there."

Pub Date: 12/29/97

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