Cutting edge - Bill Clinton and budget cutting

In his first two years in office Bill Clinton pushed a Keynesian spending plan for short-term fiscal stimulus, the largest tax increase in history, and a nationalized health-care plan. Now he is suddenly paying lip service to the Republican principles of shrinking government, cutting taxes, balancing the budget, and deregulating the economy. But with the very liberal Senator Chris Dodd (Conn.) in charge of the Democratic National Committee, the even more liberal Harold Ickes gaining influence in the White House, and Mrs. Clinton telling reporters that November 8 resulted from a "communications" failure, it is hard to believe that the Clinton team is really changing its spots.

Look at the text of the State of the Union address, and you will see plenty of evidence that the old Clinton is still around. Early on, the President harked back to the New Deal, which "helped restore our nation to prosperity," and urged Americans to retain "government as a partner." He said he is for the line-item veto and downsizing government, but he reiterated his opposition to the Balanced Budget Amendment. Like congressional Democrats, Clinton demanded to know "what you'll cut, what taxes you'll raise, and how it will affect real people."

No bold announcement of departments and agencies to be eliminated is forthcoming from the Administration. Indeed, the President ruled Medicare off the budget-reduction table altogether. He talked about cutting $130 billion out of the budget over seven years-less than $20 billion per year, compared to Budget Committee Chairman John Kasich's early mark of $200 billion in 1996 alone. But in the same sentence the President argued that the young, seniors, veterans, and other groups are entitled to continue receiving benefits.

Meanwhile, Clinton is opposed to tax cuts that would encourage saving, investment, and entrepreneurial risk-taking such as unlimited IRAs, or capital-gains tax relief, or liberalized business depreciation allowances. He also proposed an increase in the minimum wage, an old labor-union nostrum that would surely reduce entry-level jobs. Steady work of any kind should be viewed as a blessing, for it provides on-the-job training and discipline. The sanctity of work is its own reward; wage gains will take care of themselves over time.

All told, this speech was an eighty-minute filibuster designed to flash a right-turn signal to a rightward-leaning electorate. But Republicans had better be careful about this, for Clinton's credibility deficit does not necessarily ensure GOP victory in 1996.

This is why Hill conservatives wanted to exorcise the Bush "read my lips" ghost by passing the Joe Barton version of the Balanced Budget Amendment, which would have required a three-fifths supermajority for any tax increase. This could have been a clarion call that the GOP was not interested in nibbling around the edges but wanted a transformation of the Federal Government.

A clear position that rules out tax hikes on the way to a balanced budget should not be hard to defend. The 1990 and 1993 tax-hike budget deals have slowed long-term economic growth without reducing the budget deficit. Contrary to Bill Clinton's claim that "I have done more to bring down the budget deficit and save money than any President over twenty years," the latest Congressional Budget Office (CBO) estimates show a 1996 deficit forecast of $207 billion, up from last year's $176-billion estimate. "When Ronald Reagan left office," observes Heritage Foundation economist Dan Mitchell, "the deficit was $152 billion and projected to fall in future years. Now, six years and two tax hikes later, the deficit is over $200 billion and projected to increase each of the next ten years."

Unfortunately, the Barton anti-tax-hike version of the Balanced Budget Amendment could muster only 253 votes. Nearly all the Republicans stayed with Barton, with only 8 defections from the liberal Gypsy Moth wing. However, as GOP freshman Jim Tate put it, there were "not enough votes across the aisle," with only 33 Democrats voting for Barton. Key among them was Billy Tauzin (La.), who says the tax limit "is the best, most appropriate amendment." Tauzin, who won his southwestern-Louisiana district with a 78 per cent majority in 1994, may well be a key figure in budget deals later this year. He strongly believes that spending is the root cause of the deficit and argues that Congress "could have, should have, and still ought to freeze spending."

In the end, the Stenholm-Schaffer version passed with 300 votes, including 72 Democrats. This version does require a three-fifths vote to change the annual fiscal-year spending and revenue estimates, and three-fifths to raise the debt ceiling, but no supermajority for tax hikes. However, as Majority Leader Dick Armey reasoned, "The perfect should never be the enemy of the good." And, while it does not have the force of a constitutional amendment, the House did pass an internal three-fifths rule for tax increases on the first night of the 104th Congress; as long as the GOP is in power there is no chance of a tax hike.