Balanced-Budget Pact Gets Off to Swift Start

WASHINGTON — Sweeping aside doubts that the landmark federal budget deal would ever get off the ground, the House Budget Committee on Friday overwhelmingly approved a resolution that would lock into place a five-year blueprint for eliminating the deficit by 2002, provide the first major tax cut since 1981 and spare thousands of legal immigrants from looming welfare benefit cuts.

The committee approved the measure, 31 to 7, with 11 Democrats joining 20 Republicans in supporting it. The bipartisan action bodes well for quick congressional approval and stands in vivid contrast to the bitter partisan splits that have riven budgetary debates in Congress during the past two years.

“This is not only the first balanced budget in a generation, it is an American balanced budget that protects our values for future generations,” President Clinton said. “Take this balanced budget and write it into law,” he urged Congress.

“Cooperation between Congress and the president is resulting in smaller government,” said House Budget Committee Chairman John R. Kasich (R-Ohio).

The Senate Budget Committee is expected to approve a companion measure Monday, and GOP leaders hope to bring the measure to the House and Senate floors for final action next week.

Enshrining the agreement announced two weeks ago by Clinton and Republican leaders, the measure would require Congress to reduce projected spending by more than $300 billion over the next five years, including $115 billion from Medicare and $14 billion from Medicaid. But it also would make room for a net tax cut of $85 billion and for key Clinton spending initiatives dealing with health, welfare, education and the environment.

The committee action is the first step in a long legislative process in which Clinton will exercise far less control over crafting details of the budget than he has in shaping the outline of the plan.

“The burden of delivering the product now shifts to Congress and it’s in the Republicans’ hands,” said Robert D. Reischauer, a budget expert at the Brookings Institution think tank.

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Some lawmakers and budget analysts worry that, despite the plan, worse-than-projected economic conditions or a lack of resolve by future Congresses could feed continued budget deficits.

“There’s been a lot of noise about what an historic agreement this is,” said Susan Tanaka, vice president of the nonpartisan Committee for a Responsible Federal Budget. But, she said, “there have been previous agreements to balance the budget and we haven’t gotten there.”

Skeptics argued that the budget lacks adequate deficit-reduction enforcement tools. The fact that the deficit is projected to go up in the first year of the plan and does not drop below this year’s level until 2001 also raises concerns.

Under its resolution, the Budget Committee projects that the deficit would rise from $67 billion this year to $90 billion in 1998 and 1999, then drop to $83 billion in 2000 and $53 billion in 2001 before producing a $1-billion surplus in 2002.

But Senate Budget Chairman Pete V. Domenici (R-N.M.) said that he is confident that the deal will stick because budget writers included strict spending caps and used conservative economic assumptions to ensure that it is not thrown off track.

The measure is Congress’ first formal step toward carrying out the budget agreement announced with great fanfare by Clinton and GOP leaders on May 2.

But for two weeks, legislative action was stalled by bickering over the details. To settle the matter, GOP and administration officials Thursday night produced a 24-page document and two letters spelling out the pact. The committee resolution passed Friday sets broad revenue targets and spending limits and is a blueprint for tax and spending bills Congress will pass later this year.

Those documents are not binding on the congressional panels that will draft implementing legislation. Indeed, some committee chairmen are already bridling at what they see as an effort to tie their hands. But GOP leaders and Clinton said they will mount a “coordinated effort” to make the details stick.

Some of those details, if approved, have special significance for California. For example, the agreement calls for spending $700 million over five years for federal land acquisitions and exchanges. Deputy Interior Secretary John Garamendi said Friday that $315 million of the money would be used to expedite two deals already in progress: to preserve 7,500 acres of ancient redwood trees in Northern California’s Headwaters Forest and to prevent a huge gold mine from going into operation in Montana next door to Yellowstone National Park.

In another area, the administration won some modest concessions from the GOP on maintaining benefits to many of the 500,000 legal immigrants facing the loss of Supplemental Security Income this summer as a result of last year’s welfare law.

Initially, the GOP agreed only to maintain SSI benefits for disabled legal immigrants who were in the country as of Aug. 22, 1996, the day the welfare law was signed. But the administration pushed for more, and the final agreement also calls for preserving benefits for disabled legal immigrants who entered the country after that date but are on the rolls by June 1.

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Other major areas covered in the agreement include:

Taxes: The pact calls for as much as $135 billion in tax cuts over five years, offset by $50 billion in tax increases, for a net tax cut of $85 billion. The agreement also calls for cuts in the taxes on capital gains and family estates, a tax credit for families with children, expanded individual retirement accounts and $35 billion for some version of Clinton’s tax breaks for college expenses.

Medicare: The agreement calls for $135 billion in savings over five years, to come from scaled-back payments to doctors and hospitals and increased premiums from beneficiaries. Although the amount of the increase has not been decided, Democratic staff members estimated that the monthly premium could increase from $43.80 now to $66.80 in 2002, about $15 more than it would have risen under current law. However, the deal calls for $1.5 billion to expand the number of low-income Medicare beneficiaries whose premiums would be paid by the government.

Clinton initiatives: The agreement recommends $16 billion for expanding health coverage for children, $1.5 billion to relax new restrictions on food stamps and $3 billion to help welfare recipients get jobs.

Domestic spending cuts: The pact calls for allowing domestic discretionary programs, which are controlled by Congress through annual appropriations, to grow by only 0.5% a year, or $64 billion less than would be provided if spending kept pace with inflation. But the deal specifies that certain Clinton priorities be funded at the levels he has proposed, including grants for needy college students, the Head Start program, the National Park Service and toxic waste clean up.

Defense: The agreement would provide $267 billion for the Pentagon in 1998, $2.6 billion more than Clinton requested, and would permit the budget to grow to $273 billion by 2002.

Times staff writer Frank Clifford contributed to this story.

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The Impact on Taxes

The balanced-budget plan would produce net tax cuts of $85 billion through 2002 and not more than $250 billion through 2007, including:

* Tax credit for children- $500 per child

* Capital gains tax cut (details to be determined)

* $35 billion in tax relief over five years for post-secondary education

* Expanded individual retirement accounts

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In addition, House Speaker Newt Gingrich and Senate Majority Leader Trent Lott said they would seek to accommodate elements of President Clinton’s budget proposal including:

* Welfare-to-work tax credits

* District of Columbia tax incentives to spur growth

* Tax credits to clean up polluted industrial sites

Note: Tax offsets of $50 billion over five years include $30 billion by extending the life of the airline ticket tax

Erasing the Deficit

Assuming 2.1% annual economic growth, here his how budget deficit would decline:

(in billions)

* 2002: $1-billion surplus

Source: House Budget Committee