Sen. Breaux’s Compromise: Lighter on Taxes, Heavier on Cuts : Budget: As Democrats from oil states line up against Clinton’s plan, Louisianian’s alternative trims energy levy without cutting it out.

WASHINGTON — In one of the first hints of a workable compromise between the White House and rebellious Democrats, a key senator said Friday that he plans to propose a middle course that could achieve an acceptable mix of taxes and spending in President Clinton’s economic program.

Sen. John B. Breaux (D-La.), an oil state lawmaker who could determine the fate of Clinton’s tax package in the Senate, announced that on Monday he will unveil a watered-down version of the Administration’s energy tax, along with more spending cuts than the President had proposed.

Breaux’s plan is designed to be more palatable than a package introduced by another moderate, Sen. David L. Boren (D-Okla.), who wants to scrap the energy tax entirely and replace the lost revenue with caps on the future growth of Social Security and other entitlement programs.

Both Breaux and Boren are potential swing votes on the Senate Finance Committee, where Democrats hold a slim 11-9 majority over united Republicans. Clinton needs the votes of all of the panel’s Democrats to move his economic agenda to the Senate floor. The committee is expected to take up Clinton’s plan in late May or early June, after passage by the House.

Boren has declared that he will not support the President’s package if it retains the broad-based “BTU tax” on energy use in its current form. Breaux has expressed reservations about the energy levy but has indicated more willingness to compromise.

Breaux, who has been heavily wooed by the Administration in recent days because of the pivotal role he will play in the tax debate, said in an interview that Boren’s plan appears to have virtually no chance of passage in the Senate. However, he added, he believes Clinton’s plan has too many taxes and not enough spending cuts to attract broad support.

Breaux’s alternative, which he said he had not yet shown to the White House, would offer more spending cuts than are incorporated in the budget bill pending in the House, but fewer than demanded by Boren and several other Senate moderates. He declined to provide specific details of the proposal, but in the past Breaux has favored a gasoline tax, something the Administration has strongly opposed.

At the heart of the battle over Clinton’s budget is the energy tax, which would raise $73 billion over five years by imposing a levy on virtually all forms of energy use. Not only do lawmakers from energy-producing states oppose the proposed tax, moderate Democrats from other regions are lining up against it because of its impact on middle-class Americans.

More than any other provision of his economic plan, Clinton’s energy tax represents a reversal of his campaign pledge not to raise taxes on the middle class to pay for his programs.

Although Breaux is not a participant in the Boren insurrection, his decision to push his own alternative sends a strong signal that the Administration’s energy tax is unlikely to emerge from the finance committee in its current form.

And there is more at stake for the President than his energy tax proposal. Many conservative and moderate Democrats are worried that the public believes Clinton is at heart a tax-and-spend liberal who is turning to new taxes to solve an array of national problems. The tax proposals in his five-year budget plan are under attack in part because lawmakers increasingly fear they will be followed by a second round of tax hikes to finance Clinton’s pending health care reform package.

The more aggressive alternative offered by Boren came under heavy fire Friday from liberal groups, who oppose the plan’s proposed caps on benefits paid by entitlement programs.

Senate Finance Committee Chairman Daniel Patrick Moynihan (D-N.Y.) said that 25 million elderly Americans would lose Social Security benefits under the bipartisan plan advanced on Thursday by Sens. Boren, J. Bennett Johnston (D-La.), John C. Danforth (R-Mo.) and William S. Cohen (R-Me.).

Even some of Boren’s close supporters, such as Johnston, conceded that they would be willing to consider other alternatives.

“The energy tax is not a good idea,” Breaux said. “You have a package pending in the House that I don’t think has 11 votes (in the finance committee), and it would have a difficult time on the Senate floor. The Boren proposal also does not have the votes in the finance committee. But I think there is a real opportunity to create a middle ground that calls for more spending cuts (than Clinton’s plan) but not as much as Boren’s plan. I’m working on a plan that would meet the goals necessary to pass.”

It appears that many Senate Democrats are eager to find some politically acceptable substitute for Clinton’s tax-heavy program, which is designed to reduce the deficit by roughly $500 billion over five years. The White House claims its package is weighted equally between tax hikes and spending cuts, but most independent analysts say it would raise taxes at least $2 for every $1 in reduced spending.

On Friday, two key Senate Democrats said they could not endorse the Boren plan but hope to craft a substitute budget that has more spending cuts and fewer tax hikes than the one Clinton has proposed.

“While the Danforth-Boren proposal needs revisions, we support its basic thrust,” said Nebraska Sens. Bob Kerrey and James J. Exon in a joint statement. “It is a concept that hopefully will lead to a workable compromise to avoid further gridlock.”

Ross Perot, whose potential presidential candidacy in 1996 has politicians in both parties looking over their shoulders this year, praised the Boren proposal and charged that Clinton has issued a “poorly conceived tax-and-spend plan” that deserves to be defeated.

Perot called the Boren-Danforth proposal “a major breakthrough that can make the difference between success or failure in creating a new tax plan that will over time balance our budget and pay down the debt.”

Times staff writer William J. Eaton contributed to this story.