Democrats Put Price on `Contract'

Opposition mounts to Republican moves, but GOP is confident

WITH the 104th Congress now two weeks old, much of the rhetorical combat clanging across Capitol Hill is about the economic viability of the tax, spending, and budget-cutting bills that make up the fiscal portion of the GOP ``Contract With America.''

Democrats - and a few Republicans - are focusing fire on the worth of the proposed balanced-budget amendment and the social equity of welfare reform and other proposed reductions in government.

Democrats chafe at what they call the inequity of major elements in the Contract: tax cuts they claim target the rich; welfare reform they believe leaves the poor poorer; the slashing of federal outlays to states, which they warn will force governors to raise taxes during tough economic times; and a sweeping plan to eliminate government deficits that may hit their favored entitlement programs.

Across the aisle, Rep. John Kasich (R) of Ohio and Senator Pete Domenici (R) of New Mexico, the House and Senate budget committee chairmen and deficit hawks, are pressuring Contract ``revolutionaries'' to commit up front on how they'll balance the budget.

``We'll come up with specifics for the first five years,'' says Rep. Lamar Smith (R) of Texas, who serves on the House budget committee. He's undaunted by the task, having already detailed a five-year plan of $430 billion worth of ``very, very specific cuts'' last year.

His doubters include Florida Democrat Rep. Dan Gibbons, who echoed an often-heard cry from his fellow party members this week when he refused to support the GOP tax plans by ``just taking an empty promise that we're going to get the spending cuts.''

He pointed to the Treasury Department forecasts that the bill for Republican tax cuts will exceed $700 billion over the next 10 years. ``I read a lot about Draconian spending cuts, but what we're not talking about net cuts,'' Mr. Smith says. ``We're talking about decreasing the increases in spending from 5 percent a year to 3 percent a year'' and zeroing out the deficit by the year 2002.

He tells Democratic naysayers that it's also possible to grant modest tax cuts and reach a balanced budget within seven years ``without touching Social Security by reducing the increase in spending from five percent a year to just two percent a year.''

While detractors spell out the benefits and costs of the GOP agenda, conservative commentary ranges from the sublime to the scorching.

Advocates say the contract - especially the balanced-budget amendment - champions government minimalism, and would boost the private sector. Joe Cobb, senior fellow with the Heritage Foundation and former chief economist with the Republican leadership committee, is sold on it.

``The balanced-budget amendment would constrain fiscal policy as a tampering tool and eliminate [reckless government spending] because budgets would truly be pay as you go.''

Mr. Cobb welcomes the proposed lifting of Washington's mandates on states and the extension of lump-sum grants because it saves Uncle Sam money, and forces governors and municipalities to make prudent choices for the most essential programs.

And on the planned tax cuts - from middle-class cuts to a reduction in the capital-gains tax - he says: ``If a tax cut will cause economic growth but lose revenue in the first five years, I still want that growth. It's important to set the country on the right course.''

Others don't feel comfortable at all. Herb Stein, who worked as chief economic adviser to President Nixon, complained in a recent New Republic article that ``it is unfair to ask the American people to sign on to the amendment without telling them what they are committing themselves to - what combination of tax increases and expenditures might be required to achieve the balanced budget.''

Murray Weidenbaum, former chairman of Ronald Reagan's council of economic advisers, chides his colleagues for getting ahead of themselves. ``If my fellow conservatives are really interested in getting the deficit down they ought to start right now and not delay that even until, assuming term limits are enacted, someone else is in office.''

Earning tax cuts

Before passing tax cuts, lawmakers should earn them by making tough spending cuts, he says.

But Mr. Weidenbaum, who now runs the Center for the Study of American Business at Washington University in St. Louis, likes the prospect of a Reagan Redux, given the contract's promised tax cuts and regulatory reform.

He has long pushed lawmakers to cut away at the web of costly mandates for business - ranging from compliance with environmental laws to the Family Leave Act.

He expects Congress to successfully lift this burden from US entrepreneurs, a move he says is certain to reduce the deficit by eliminating the need to pay for regulatory bureaucracies and reducing the compliance costs of American firms so that they can hire more workers, expand their businesses, and increase the nation's tax base.

Critics caution that Congress threatens to impose an even greater burden on America's poor.

Secretary of Health and Human Services Donna Shalala presides over the nation's welfare system the contract would prune with sharp shears.

She told Congress earlier this week that GOP plans to send to orphanages the millions of children of welfare mothers who would be denied aid under the contract provisions would ``divide families when we should be strengthening them.''

She added: ``It will let fathers off the hook when we ought to be holding them accountable. And it could lead to more poverty, more spending, and more bureaucracy at a time when we desperately need less.''

Rivlin warns on amendment

Clinton's budget director Alice Rivlin warns that a balanced budget amendment would simply be bad economic policy. Deficits go up, she says, when the nation's economy falters and that government spending - in the form of unemployment compensation, food stamps, and other social welfare programs - must be there ``cushioning the slide'' of the needy.

Challenging that assumption, Rep. Smith says it is imperative to pass the centerpiece of the contract - a balanced budget.

``Deficits erode national prosperity, with higher interest rates - and that affects many more Americans than the poor,'' he says. ``It hurts those who borrow money to go to school, to finance their cars and mortgage their homes.''