Chokepoints on Way to a Budget Deal

AMERICA'S POCKETBOOK

This week, Congress and President Clinton embarked on what could be a historic endeavor to end 26 years of red ink: a balanced budget.

Senate majority leader Trent Lott of Mississippi has declared that he wants to finish the budget process by April 15; such an early completion date is almost unprecedented in recent years.

Congress is now poring over Mr. Clinton's $1.7 trillion budget, which is a proposed blueprint for where America's government resources will come from and how they should be spent this year and in years ahead. The president says his plan will balance the nation's books by 2002. Congressional Republicans are skeptical.

They say the Clinton plan would lead to an estimated $50 billion deficit in 2002 instead of the president's projected $17 billion surplus. Republicans are using the less optimistic projections of the Congressional Budget Office while Clinton is relying on forecasts from his Office of Management and Budget.

Republicans also object to Clinton's plan because it assumes the federal deficit will rise this year and not fall below 1995 levels until 2000. Some 75 percent of the cuts come in the two years after Clinton has left the White House. Deficit hawks of both parties want to gradually lower the deficit each year.

The most difficult bargaining is likely to take place in the following areas:

* Entitlements. While Clinton proclaims that "the era of big government is over," Republicans note that the president proposes six new federal aid programs costing $60 billion. They include $15 billion in new Medicare benefits, $5 billion in new Medicaid benefits for children, $10 billion in health-care benefits for the unemployed, $4 billion in health-care benefits for children not eligible for Medicaid, $6.2 billion in school construction and other education entitlements, and $21 billion to restore welfare and food stamps to legal immigrants.

* Taxes. The president wants "targeted" tax cuts of $98 billion. Almost half is a $500 tax credit for each child younger than 12. Another big portion is a $1,500 tax credit and a $10,000 deduction for college expenses. Clinton would also raise $76 billion, about half from closing corporate tax "loopholes," and half from reimposing a 10 percent tax on airline tickets.

But Republicans say the net $22 billion tax cut is too small. They would prefer a much larger reduction that includes more taxpayers with higher incomes. In addition, the package includes "triggers" that would rescind some tax breaks if the economy does not perform as well as expected. And several of the president's tax cuts would expire in 2002 or before, while the GOP wants permanent relief.

* Medicare. The president proposes cutting the growth of spending from Medicare's hospital trust fund by $100 billion over five years. But Republicans say the cuts come entirely from payments to doctors, hospitals, and health-management organizations; and from transferring home health care from the hospital fund - paid for by payroll taxes - to the physicians' fund - paid for out of general revenues. Republicans say this will not keep the hospital fund from going bankrupt by 2001.

What happens next?

Republicans say they will work from the president's budget rather than introduce one of their own. Hearings began this week in both houses of Congress. After the negotiations with the administration have concluded, the Senate and House will each pass a version of the budget. Then, the real arm-twisting compromises begin. Bipartisan conferees will negotiate an agreement both houses can accept and the president will sign.