Administration rejects Democrats' tax-cut plan

Senators had proposed $500 billion compromise


WASHINGTON -- The Clinton administration said for the first time yesterday that it would not accept a compromise $500 billion tax-cut plan proposed by a group of Senate Democrats, virtually ensuring that the debate over how to spend the projected budget surplus would not be settled quickly or easily.

"The president will veto a $500 billion tax cut because it doesn't leave room for what's necessary," said Treasury Secretary Lawrence H. Summers.

Echoing that statement, Gene Sperling, the White House economic adviser, said the president would veto a tax cut of $800 billion or $500 billion because it threatened the country's ability to secure Medicare and Social Security and pay down the national debt.

Before yesterday, the White House had said it favored limiting any tax cut to about $300 billion but had never said it would veto the Senate Democrats' compromise. The Senate Democratic leadership has also said it favors a tax cut plan of about $300 billion.

But about a half-dozen Senate Democrats who have often been at odds with the administration proposed the plan to cut taxes by $500 billion over 10 years as a way to bridge the gap between the $792 billion cut approved by the House of Representatives and the $250 billion to $300 billion proposal offered by the White House.

One of those senators, John B. Breaux, a Louisiana Democrat, continued to promote the plan yesterday, arguing that it would "give us enough money to address Medicare, prescription drugs and also give us enough money for discretionary spending."

But Breaux, a member of the Finance Committee, added that without a compromise, "we are headed for a major train wreck, which I think would be terrible for the American people. Here we have a trillion-dollar surplus, and the two political parties in Washington can't figure out what to do with it."

Breaux and Summers were speaking on the CBS program "Face the Nation." Sperling appeared on the Fox Sunday news program.

The government's current estimates project a surplus of $2.9 trillion over the next 10 years, and that has set off the contentious debate over how the money should be spent.

Both party proposals are mirrors of their basic philosophies, and both are addressing the issue with the 2000 elections clearly in mind.

Speaking of the House tax cut bill Sunday on CNN, Rep. Dick Armey, a Texas Republican and House majority leader, said, "There's so much compassion in this package that I have to tell you, my heart warms."

Republicans are trying to make the argument that, without a tax cut, the budget surplus will be squandered by Democratic spending programs.

Democrats argue that the budget projections are just that -- uncertain looks at the future of the economy. Therefore, large tax cuts are risky.

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