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White House economic plan likely to fund $16 billion in domestic appropriations.

President Clinton went to Capitol Hill twice last week to meet with Democratic leaders in the House and Senate to discuss his $31.8 billion short term economic recovery program, his proposals for long term investment, and his plans for a $145 deficit reduction plan. The President plans to present the outlines of all three in a State of the Union speech to the Congress and American people on February 17th.

The move came as President Clinton prepared to meet with leaders of the nation's cities at the White House last Friday to discuss these plans and how they would affect the nation's cities and towns.

Mayors of more than 40 cities gathered at NLC last Friday prior to a meeting with new HUD Secretary and former NLC President Henry Cisneros, and then accompanied Cisneros to the special meeting with the President.

In his meeting with Congressional leaders on his economic package, the President made clear that no decisions were final yet, either with regard to the components or with regard to how the three parts would be packaged. After meeting with the nation's governors early last week for their input on fashioning deficit reduction, health care, long term investment, and short term economic stimulus plans, Clinton closed out the week by seeking final input from the nation's cities.

In his meetings with Congressional leaders, Clinton asked for advise and recommendations on all fronts within the next few days in order to shape his final package and ensure the earliest possible action by Congress. $31.8 Billion Short Term Economic Stimulus

The White House plans a $31.8 billion short term economic recovery plan as the first step. This plan is likely to include about $16 billion in additional 1993 domestic appropriations, or additional spending for existing programs, including the Community Development Block Grant (CDBG), surface transportation (ISTEA), federally mandated environmental infrastructure programs, summer youth unemployment, and others.

By proposing a supplemental spending bill, the administration would insure using existing mechanisms, as NLC recommended, to insure the most rapid delivery to local governments.

The other part of the short term package is expected to be made up of tax incentives, including a retroactive investment tax credit, a targeted capital gains tax cut, and extensions of some priority municipal tax programs, including the mortgage revenue bond and low income housing tax credit programs. Because tax spending must go through Congress' tax-writing committees, the White House has not decided its final legislative strategy for the tax portion of the short term plan.

Longer Term

The administration hopes that its short term stimulus will be a sweetener to help the more bitter taste of its deficit reduction program go down.

In meetings with Congressional leaders, the administration has indicated that its long term plan to shift federal budget priorities and reduce the deficit will involve steep cuts in defense spending, controls on federal entitlement programs, cuts in some big ticket domestic programs--such as the NASA space station-and significant revenue increases, including a broad-based energy tax.

As a first step, Defense Secretary Les Aspin last Wednesday ordered $8.3 billion in additional defense spending cuts for next year. The cuts would go towards a planned four-year $60 billion cut from current defense spending levels. Aspin indicated that as much as $2 to $3 billion in savings from the first round could be used to provide economic conversion assistance to communities affected by the cuts. Similarly, the White House has indicated that virtually all of the approximately $14 billion in already-realized defense savings should be used to pay for the economic stimulus plan.

The President's cabinet secretaries are under orders to meet or appeal the White House's budget targets this week as the President shapes his final budget plans for presentation to the Congress on March 23.

On the tax front, new Senate Finance Committee Chairman Daniel Patrick Moynihan (D-NY) said last week that there is growing support in the Senate for the administration's proposal for a broad-based energy tax. Such a tax, which could reduce the federal deficit by up to $90 billion over the next five years, is likely to involve either an ad valorem, or added value tax, similar to a federal sales tax on fuel bills, or a tax on British thermal units (Btu's). The final form of the proposal remains uncertain, however, and is expected to be controversial.

The President is certain to propose an increase m federal income tax rates from the wealthiest Americans, probably proposing an increase from the current 31 percent to 36 percent. And the administration is considering increasing the Social Security income subject to taxation from its current level to 85 percent, in effect treating Social Security income the same as other pension income is treated.
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Author:Shafroth, Frank
Publication:Nation's Cities Weekly
Date:Feb 8, 1993
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