Budget Realities Chill Drive to Slash Spending

WASHINGTON —  For both President Clinton and House Speaker Newt Gingrich, the past few days have provided an important reality check on just how far and how fast Washington can move toward balancing its books.

Even as Republicans chided Clinton for failing to offer a spending plan that adheres to a proposed balanced-budget amendment, GOP leaders acknowledged privately that they must delay for another two months the release of their plans to cut federal spending to pay for their “contract with America.”

The contract calls for big tax cuts as well as a balanced-budget amendment to the Constitution, and the task of financing both is proving to be far more daunting than even the most hardened GOP budget-cutters anticipated.

In fact, House Budget Committee Chairman John R. Kasich (R-Ohio) admitted that it will take him at least until the end of March to put together a package of spending cuts to offset the $203 billion in tax cuts promised in the contract. Gingrich (R-Ga.) chose Kasich to craft the Republican alternative to the $1.6-trillion budget Clinton will officially unveil Monday.

And it could take months longer to present a comprehensive solution to the devilish question of how to slash $1 trillion from the federal budget over seven years in order to bring spending and revenue into balance by 2002, when the GOP’s amendment would take effect.

This is the second extension of Kasich’s budget timetable; he had initially promised to detail spending cuts by the end of January. The delays could prove critical because House Republicans have pledged not to enact tax cuts until the spending reductions are in place. So the House might not be able to vote on the contract proposals within the promised 100 days.

Above all, the delays show that the harsh realities of budget politics are beginning to have a chilling effect on even the most hot-blooded Republican revolutionaries.

Kasich’s inability to attract sufficient support for the kind of austerity plan he wants Congress to adopt ranks among the most damaging setbacks suffered by the Republicans since they seized control of both the House and Senate in the November elections.

Senior Clinton Administration officials were quick to fault congressional Republicans for failing to live up to their rhetoric so far.

“John Kasich said he would have spending cuts in his budget by the end of January, and it simply hasn’t happened,” crowed one senior Administration official Saturday. “Critics are saying that our new budget is a me-too budget, Republican-lite. But to say we are Republican-lite implies that there is a Republican budget plan, and we haven’t seen it.”

Because of the budget-drafting delays, the Republicans have been forced to concentrate on contract initiatives that don’t cost much, such as legislation to impose term limits on lawmakers and ban unfunded federal mandates on state and local governments.

Kasich and Gingrich have found it necessary to stretch out their timetable because of what appears to be mounting resistance within the GOP to the massive spending cuts required to pay for the party’s sweeping legislative agenda.

Republican governors reportedly have blanched at Kasich’s plans to generate huge savings by whacking Medicare and Medicaid, while other House committee chairmen appear to be wresting authority away from Kasich on potential cuts affecting programs under their jurisdiction.

“We have changed our approach (to the budget) because we think it is important to allow our committee chairmen to decide for themselves where to make specific spending cuts in their areas,” said Gingrich spokesman Tony Blankley.

As a result, Kasich has been forced to overhaul his original legislative strategy for presenting his spending plans to Congress. That, in turn, could make his strategy much more vulnerable to Democratic attack and stalling in the Senate.

At the same time, the fiscal blueprint Clinton will present to Congress on Monday is extremely cautious, one that critics say contains a mishmash of spending increases and budget cuts that won’t strongly challenge the Republicans on any key policy points.

What’s more, Administration officials admit that, like the Republicans, their budget dodges the most pressing fiscal problem of the coming decade: how to rein in the runaway entitlement spending that is the driving force behind the federal budget deficit.

Without a solution to the entitlement problem, Clinton will never come close to achieving a balanced budget, White House officials conceded.

The Administration will declare that it is holding the deficit to $196.7 billion in 1996 and will keep the shortfall from exceeding $200 billion in all but one of the next five years. But the White House plan requires very little pain; it will, in fact, propose a 2.3% increase in total domestic spending in 1996.

Spending cuts in low-priority domestic programs will be used to finance tax cuts for the middle class and increased outlays for a handful of preferred programs. The budget includes a $9.7-billion increase in spending on Clinton’s cherished “investment agenda,” which includes Head Start, education, job training and technology initiatives.

The only major budget category that would suffer a sharp reduction next year is defense. Despite Clinton’s decision in December to increase defense spending by $25 billion over the next five years, the Pentagon budget would still shrink from $272.1 billion in 1995 to $262.2 billion in fiscal 1996, which begins Oct. 1.

Over the next five years, the Administration proposes to achieve $144 billion in budget savings, which it would use to pay for $63 billion in tax cuts and to reduce the deficit by $81 billion.

Officials said that $101 billion of those savings would come from “discretionary” spending, which does not include mandatory entitlements, such as Medicare, Medicaid, Social Security and veterans benefits. Only $29 billion would come from entitlement restraints, such as extending existing limitations on Medicare spending and eliminating subsidies for Western hydroelectric power.

The Clinton budget fails to address the burgeoning cost of federal health care and retirement programs, and it imposes no new cuts on Medicare, Medicaid or Social Security. In fact, it would allow spending on Medicare and Medicaid to rise $27.8 billion in 1996 alone, and by a total of $137.7 billion from 1995 to 2000.

Having failed to win support for comprehensive health care reform in 1994, Clinton has, in effect, decided to allow costs to rise unchecked until Congress acknowledges there is a serious crisis, officials acknowledged.

“There is no question the problem of entitlement spending is still there and that health care costs are still the basic problem,” said a senior Administration official. “But we felt that this year, it would be more useful to try to engage in a conversation with Congress on the issue than to simply throw a proposal on the table.”

The White House is so nervous over the entitlement issue that it will not even propose cuts in non-health entitlements, such as veterans benefits or farm subsidies.

Administration officials acknowledged that they will be unable to bring the deficit down much further without tackling Medicare and other entitlements, but they made it clear they will let Gingrich and Kasich make the first move.

“It is hard for me to see how you can balance the budget by the year 2002 without slashing Medicare and Medicaid,” said one senior Administration official. “I think that is what the Republicans are going to find. But all we have heard from them so far is highfalutin talk.”