But the issues may not provide safe haven for long. Now he must turn his attention to the thorniest issue of all, the economy, where he faces seemingly contradictory goals. He has promised to cut the budget deficit in half in four years, but he has also promised to spur the economy and create jobs, which will add to the deficit, at least in the short term. The spending part will be easy. Clinton wants quick passage of a $30 billion economic-stimulus package, and he’ll get it. Congress loves everything he’s proposed: an investment tax credit targeted to create jobs, the full funding of Head Start, spending on public works and highways. The pain of deficit reduction will be in a separate bill that will call for spending cuts, defense cutbacks and increased taxes. There is no guarantee that Congress won’t just gobble K the dessert and push away the main course. Clinton unveils his package in an address before Congress on Feb. 17. Until then, Clinton will be pulled every which way by competing interests, not all of them worthy. Within the administration, the battle lines have been drawn between “deficit hawks” led by budget director Leon Panetta and a “grow now, pay later” camp headed by Labor Secretary Robert Reich. A guide to the budget machinations:
Somebody has to get control of runaway entitlements, but it won’t be Clinton. When the subject of freezing cost-of-living increases for the elderly was broached in an Oval Office meeting with Democratic senators, Majority Leader George Mitchell told Clinton: “You’ll lose the Senate.” Clinton won’t touch COLAs. That would be political suicide. But he will ask for further taxing of social-security benefits for well-to-do recipients, a move that will anger senior citizens’ groups and require the Democratic Congress to swallow hard. Clinton handled this in a time-honored Washington tradition. Aides first floated the worst-case scenario, the COLA freeze. Then, after key Democrats had their tantrums, what Clinton intended to do all along-increase taxation-looked good by comparison. Surveys show senior citizens as a whole are better off than any other age group. They’re also better organized, ensuring a fight whatever Clinton chooses to do.
Clinton cannot get away with the “magic asterisk” that Reagan administration budget director David Stockman used instead of specifying spending cuts. As the deficit ballooned, so did the public’s cynicism about government. Clinton faces a much higher threshold of credibility than Ronald Reagan or Bush, even though he is grappling with a deficit that is not of his own making. Clinton passes the reality test if he keeps initial spending small (some $30 billion, about half the $50 billion he proposed during the campaign); proposes something painful (like a broad-based energy tax), and axes some government program that is popular with defense contractors (like the space station). During the campaign, Clinton was often stumped when asked what government spending he would cut. The only program he singled out was one that provides subsidies to honeybee producers, a marginal cut that offends a minimum number of people.
Clinton aides are scornful of “pain merchants” who elevate deficit-cutting to an end in itself The deficit, says political consultant James Carville, “is not a voting issue, except to people who live inside the Beltway and make a lot of money.” Still, Clinton has to prove he is serious about attacking the deficit, or the financial markets will punish him. Enough tough choices have been floated that if Clinton doesn’t follow through, it will be seen as a failure of nerve. Clinton doesn’t have to keep his promise of cutting the deficit in half in four years, but he does have to show progress. In the election, Ross Perot revealed there is a sizable constituency for politicians who tell the truth about the economy and what needs to be done.
Clinton is mindful of the broken promises that sap voters’ confidence in their leaders. He campaigned on a pledge to ease the tax burden on “the forgotten middle class,” and now he is likely to ask all voters, except the very poorest, for sacrifice. To soften the blow, some Clinton aides are pushing a “children’s tax credit” as part of the short-term stimulus package. It wouldn’t be as expensive as the middle-class tax cut Clinton campaigned on, and it would partially redeem his commitment to the hard-pressed families whose votes he courted. Clinton doesn’t dare slap on a gas tax, which would be a direct violation of what he said in the campaign. But a broad tax on all fuels, which he is considering, will boost everybody’s utility bill and hurt the middle class the most. In keeping with environmental correctness, greater levies would be placed on high-polluting fuels, such as coal, and less on natural gas, which is cleaner.
Clinton wants it all. As a candidate, that was possible, at least rhetorically. As president, he has to choose. There is reward only if he inflicts pain. If he does the big, the bold and the controversial, he can squeeze out enough money for a down payment on the programs he cares about, like national service and a police corps. Facing up to the tough choices means getting skewered for a good cause. If Clinton flinches-no matter how much he talks policy-it will become increasingly difficult for him to change the subject.
The president has already shelved several of his economic campaign pledges. To soften the blow, he’ll announce a quickie economic stimulus of $30 billion when he addresses Congress next week. But the ever-growing budget deficit makes long-term fixes to trim it read like a Menu of Pain.
The president may tax the rich by raising the top income-tax rate to 38 percent-but only for couples with incomes above $200,000-and throw in a 10 percent surcharge on incomes above $1 million. Then, he’d hit the rest with a broad-based energy excise tax-perhaps 5 percent-on everything from coal to nuclear power, and increase sin levies on alcohol and tobacco.
$20 billion from the rich and another $20 billion from the rest. Total: $40 billion.
Republicans. And Clinton promised during the campaign to give the middle class a tax break.
Lopping 1 percent off the cost-of-living adjustment for social-security recipients and pensions for federal retirees, plus capping similar automatic increases in programs ranging from agriculture subsidies to nuclear-waste disposal.
$8 billion from social-security COLA cuts, $1 billion from federal pensions and $2 billion from other automatic increases. Total: $11 billion.
Most of these cuts are regressive and would mean open warfare with the powerful interests they affect-senior citizens, farmers and industry groups.
George Bush began shrinking the military, but Clinton may slice an additional 4 percent off the defense budget. That could include freezing the Star Wars program and lowering U.S. troop strength by 400,000 over four years. He also proposes converting defense-sector factories for commercial use.
$8 billion from army, navy and air force budgets, an additional $6 billion from reduced procurements. Total: $14 billion. But factory retooling costs $2 billion to $3 billion.
Huge military and defense layoffs counter Clinton’s efforts at job creation.
Clinton is considering stern caps on hospital-service and doctors’ fees, plus sweeping administrative reforms that would save billions of dollars. At the same time, he may try to raise up to $40 billion in income taxes on health-care premiums to finance extension of health insurance to the poor, another promise made on the campaign trail.
$10 billion.
The middle class, which would shoulder the burden of insuring the poor. No serious deficit reduction is possible without curbing widely used Medicare and Medicaid programs.
