Budget surplus takes a hit

White House's estimate for next 10 years falls well below Congress'

Difference of $88 billion

Projection likely to become an issue in tax-cut bid, campaign

February 06, 2000|By Jonathan Weisman | Jonathan Weisman,SUN NATIONAL STAFF

WASHINGTON -- The White House budget office will unveil trimmed surplus projections tomorrow that could sharply undercut the drive by congressional Republicans to enact a large tax cut this year, while undermining George W. Bush's even more generous economic plan.

President Clinton's Office of Management and Budget will forecast a 10-year surplus of $750 billion to $760 billion, not counting revenue generated by Social Security payroll taxes.

That is as much as $88 billion lower than the most conservative surplus projection the Congressional Budget Office floated last month.

It is nowhere near the $1.9 trillion that the CBO forecast if Congress froze spending at current levels or stuck to spending cuts required in the 1997 balanced-budget deal.

The new projections will also be considerably smaller than the $1 trillion estimate forecast by the White House in June, when budget writers assumed that the government would adhere to the 1997 spending limits.

The new White House numbers could have considerable impact, not just on Capitol Hill but also on the campaign trail.

"We have a big political battle on our hands," said Robert Greenstein, director of the Democratic-leaning Center on Budget and Policy Priorities.

"There's no room left for George W. Bush's tax cut without going into the Social Security trust fund. And for that reason alone, Republican leaders will conclude they cannot agree with this surplus projection."

The projection concedes that the spending limits are as good as dead. Instead, White House budget writers assumed that this year's federal spending levels would rise with inflation, while defense spending increased even faster in the wake of a military budget blueprint agreed upon by the Republican Congress and Clinton last year.

"The watchword this year is `realistic,' " White House spokesman Jake Siewert said. "We're trying to construct a budget that's realistic about what's really available."

The White House would like to spend the surplus on a $350 billion tax cut, offset by closing tax loopholes and a 25-cent-a-pack cigarette tax increase.

About $400 billion would be dedicated to shoring up Medicare, with a quarter of that paying for a new prescription drug benefit. An additional $110 billion would be spent to extend health insurance coverage to some of the working poor.

The White House's numbers are sure to be hotly disputed by Republicans on Capitol Hill seeking to lock in large tax cuts. Some conservatives are moving to propose a tax cut similar to Bush's, which could cost more than $1 trillion over 10 years.

"The OMB works for the president of the United States, and they gave him the number he asked for," said Terry Holt, spokesman for the GOP-controlled House Budget Committee.

The projections will have to be contested by Bush, who is counting on far higher surpluses to pay for his proposed tax cut and to provide more money to spend on defense and education.

Clinton's figures play into the hands of Bush's chief rival, Arizona Sen. John McCain, who has proposed a much smaller tax cut, coupled with debt reduction, and who has repeatedly questioned the wisdom of making policy based on constantly fluctuating 10-year revenue forecasts.

The figures also help Vice President Al Gore, who is campaigning against what he has called the "risky tax schemes" of his potential Republican rivals.

It is that link that is sure to draw fire this week on Capitol Hill.

"Most of us view this budget as a document that speaks more to the political needs of the vice president than anything else," Holt said.

Behind the partisan rhetoric, consensus is forming that could mean modest achievements this year, said G. William Hoagland, director of the Republican-controlled Senate Budget Committee.

The OMB's $750 billion surplus projection is close enough to the Congressional Budget Office's most conservative estimate -- $838 billion -- that moderate Republicans and Democrats could settle on a figure.

Clinton is expected to propose a $15 billion increase in defense spending next year, bringing the Pentagon's budget to $305 billion, about what Republicans agreed to last year.

Many of the tax cuts that Republicans are seeking have also been proposed by the president, although in far more modest form.

For instance, the House Ways and Means Committee has approved a tax cut worth $182 billion to eliminate the so-called marriage penalty some couples are subject to. Clinton has his own version, aimed at moderate-income couples, that would cost the government $45 billion.

Those differences could be worked out, Hoagland said, if the White House and Congress are willing to jettison their more ambitious agenda items, such as Clinton's health insurance proposal or a Bush-style tax cut.

"We have an opportunity to get some minor things done, get out of town and live for another day and another president," Hoagland said.

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