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Injecting reality into Clinton's deficit plan.

THERE COMES a moment in every administration when a president makes a decision that at best casts a cloud over his presidency, or at worst destroys it. For Lyndon Johnson, it was escalating the war in Vietnam; for Richard Nixon, covering up the Watergate burglary; for Gerald Ford, pardoning Richard Nixon; for Jimmy Carter, authorizing the Desert One rescue operation; for Ronald Reagan, selling arms to Iran; and for George Bush, reneging on his promise not to raise taxes.

Has that moment already come and gone in the Clinton presidency? It would be hasty to rush to such a judgment. It would not be too rash, however, to suggest the possibility. In the first weeks of the Clinton Administration, when his advisers were struggling over his deficit reduction proposals, the President made several crucial decisions: * He rejected the advice of his so-called "deficit hawks"--Office of Management and Budget (OMB) Director Leon Panetta and his top assistant, Alice Rivlin--to restrict the growth of the cost-of-living adjustments (COLAS) for Social Security. Instead, he accepted the advice of the "wiser heads" such as Treasury Secretary Lloyd Bentsen and bowed to the threats of the Senate Finance Committee chairman Daniel P. Moynihan (D.-N.Y.) to avoid a difficult political fight with the Congress and the American Association of Retired People (AARP). * After allegedly scouring the non-defense discretionary budget for "programs that do not work or are no longer needed" (the language of the Clinton budget message), the Administration only could come up with nine such programs totaling $6,500,000,000 over a five-year period. These included the elimination of Russian/Eurasian research, the Tennessee Valley Authority fertilizer and community development programs, and the State Justice Institute, as well as reductions in the Export Administration workload. The other cuts came under the heading of "charging fees for government services" (hardly a spending cut) and such vague categories as "streamlining government," "managing government for cost-effectiveness and results," and "technical adjustments." These usually amount to promises devoutly to be wished for and nothing more. * In the entitlement area, the legerdemain was no less cunning. Of the promised $99,000,000,000 in reductions during 1994-97, more than $20,000,000,000 are from increased taxes on Social Security benefits, $17,000,000,000 from promised efficiencies, and $7,000,000,000 from user fees. The major cuts come in health care cost reduction ($38,000,000,000), and many of these simply will pass on costs to hospitals, physicians, and, eventually, the public.

The result was a program that promised $117,000,000,000 in spending cuts and $207,000,000,000 in tax increases--a reversal of the priorities OMB Director Panetta had suggested. Clinton has missed an opportunity of historic dimensions. Presidents Reagan and Bush's proposals for eliminating programs and cutting spending blithely were ignored by the Democratic Congress. Clinton, by contrast, brings more clout to Congress than his Republican predecessors could have imagined. By asking for real cuts in discretionary and entitlement spending and putting his presidency on the line, he would have put the Democrats in Congress on the spot. If they defied him, they would undermine his presidency before it even began. With Clinton exposed as powerless early in his term, what would be the future prospects of the Democratic Party? Given this stark choice, the vast majority of the Congressional Democrats would have gone along.

So would have the American people. The initial public response to the President's presentation to Congress was a clear demonstration of willingness to accept sacrifice add support him against the special interests. The AARP will fight him just as hard on the increases in taxes on Social Security benefits as they would on COLA adjustment, so why not make the fight over something important?

Although Clinton's cuts are vague, his increases are quite real. They call for $100,000,000,000 over four years in "strategically targeted research" in selected areas of high technology; railroads, highways, and bridges; renewable and other futuristic sources of energy; Head Start; and job training. These are considered investments that will spur economic growth. In the American political experience, it is not rare to see noble ideas converted into Congressional pork. Consequently, these "investments" could have little or no impact on economic growth.

If, after all these flourishes and trumpets, the nation is left with a continuous rise in budget deficits, all the public will have been treated to is another exercise in political disillusionment. Interest on the national debt will take an increasing percentage of the Federal budget; entitlement costs will consume even more; and, given Clinton's preference for more activist government, Washington will devour greater shares of the national wealth.

A genuine plan for deficit reduction would involve no increased spending, caps on COLAs, and tax increases that do not discourage economic growth (plugging loopholes, rather than raising rates). However, this is not what the Clinton Administration has in mind. The agenda of contemporary liberalism simply is incompatible with serious deficit reduction. Among the priorities of the Clinton Administration, one must place increasing government direction of the economy and using the tax system to affect the redistribution of wealth as considerably above shrinking the deficit. If this is not apparent now, it soon will be. The rhetoric of Clinton's plan is that of the deficit hawks; the reality is something altogether different.
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Author:Bresler, Robert J.
Publication:USA Today (Magazine)
Article Type:Column
Date:May 1, 1993
Previous Article:How to end the mess in Washington.
Next Article:Recessions and rhetoric.

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