GOP Unveils Cuts -- Tough Ones to Come

FIRST the candy. The spinach comes later.

That may be the message emanating from a week of fiscal policy wrangling in the House, as GOP leaders push action on the centerpiece tax and budget cuts promised voters in their Contract With America.

Tax cuts might be seen as the candy. Speaker Newt Gingrich (R) of Georgia said this week that the House will soon vote on its $189 billion in proposed tax reductions -- even though the package won't have long-promised specific budget cuts attached.

These budget cuts might be viewed as the spinach. House Republicans are indeed moving ahead with budget-slashing plans: On Thursday, the Budget Committee unveiled plans to reduce a broad range of discretionary spending programs by $100 billion. But the move is only illustrative. Another panel, the Appropriations Committee, has the authority over specific spending decisions, and it won't fashion a plan until May. By then, the package of tax-and-spending cuts being considered now may be irrelevent.

Lower discretionary caps ''is 90 percent packaging and 10 percent substance,'' says Robert Reischauer, former director of the Congressional Budget Office and now a scholar at the Brookings Institution in Washington. ''Changes in caps signal political pain in the future.''

Still, the budget moves made this week were an important step by House GOP leaders toward meeting their promises of showing how they will pay for their proposed tax cuts and put the budget on the road to balance.

In a packed committee, Budget Committee chairman John Kasich (R) of Ohio unveiled a plan that reduces discretionary spending limits $100 billion below fiscal year 1995 outlays, and freezes the cap at that level through the year 2000. The plan also eliminates annual adjustments for inflation.

The proposal cuts ''needless bureaucracy'' by $23 billion, foreign aid by $11 billion, and community and private sector programs by $11.4 billion.

''When you cut spending, good things happen,'' Mr. Kasich says. ''We provide three times the tax relief that the president does ... and $60 billion more in deficit reduction than the president's budget.''

Ranking minority member Rep. Martin Sabo (D) of Minnesota responded: ''Our first priority should be reducing the deficit, not passing tax cuts. Then there is a question of equity.... Under your proposal, 34 percent of children live in families with income too low to qualify'' for the tax credits.

The $100 billion package offers the most significant look yet at how the House Republicans are turning their philosophy of smaller government and greater personal responsibility into policy.

The plan, combined with roughly $70 billion in proposed cuts to welfare and other entitlement programs, would pay for $189 billion in tax cuts and initial deficit reduction. The combined tax and spending cuts will reach the House floor at the end of the month. The House also voted Wednesday to cut the current budget by $17.5 billion that Republicans have also promised to put toward the deficit.

But the latest cuts are a relatively small step down the road to a balanced budget and are meant mostly to pay for tax cuts. To stanch government red ink by 2002, the target year set by House Republicans, Congress will need to find $1.7 trillion in savings. The current plan focuses mostly on discretionary spending; the next round of cuts this spring is likely to focus on such entitlement programs as Medicare and Medicaid.

Further, the combined package of tax and spending cuts faces uncertainty in the Senate, where Republicans and Democrats see little wisdom in tax cuts when deficit reduction is a high priority.

But Martin Anderson, an economic adviser to President Reagan from 1981-82 and now a senior fellow at the Hoover Institution in Stanford, Calif., argues that lowering the spending caps represents real savings. ''There are two kinds of cuts,'' he says, ''real cuts from current spending, and smaller increases'' in projected spending.

''If you don't lower the caps, you don't reduce the deficit,'' says former Rep. Tim Penny (D) of Minnesota, who teamed with Kasich in the last Congress to propose legislation similar to the plan unveiled yesterday. ''Lower caps force budget cuts in the future. They remove money so that it can't be reallocated.''

The package has as much to do with Mr. Kasich as it does with implementing the Republican agenda in the House. A brash and boyish deficit hawk, Kasich has spent his career preparing to lead the charge against fiscal irresponsibility. As a minority member he submitted his own budget plans each year.

The Penny-Kasich amendment, for example, would have shaved $100 billion from the deficit in addition to the Clinton budget, but failed by six votes.

Following the approach he and Penny used, Kasich divided Republicans on the Budget Committee into task forces focusing on such areas as government management, infrastructure, and natural resources. Each group studied every program under its purview for cuts. Meetings were so secretive that members and staffers were not allowed to carry paperwork out of the conference rooms.

On Tuesday, the groups came together and considered every proposed spending reduction. According to members present at the session, they started with $126 billion in cuts. If a proposal was contested, it was written on a blackboard and debated. Urban interests were pitted against rural.

Some proposals, to slash or zero-out funding for Chapter 1 education programs, the Peace Corps, national service, and community-service block grants, were deferred until the spring round of cuts.

The final package, one senior Budget Committee staffer says, reflects GOP priorities to return money to working families and cut programs that only hurt the impoverished citizens they were meant to help. ''We feel mothers know how to spend money on education better than Joycelyn Elders,'' he says.