Bush Budget Full of Incremental Adjustments; Big Battles Unlikely

FISCAL TINKERING

THIS will not be a year for bold government or grand budget battles. The way the Bush budget proposal for the federal fiscal year beginning next October was received around Washington Feb. 4 made that clear.

After a bitter ruckus last summer and fall over a budget deal that devastated public confidence in the competence of government, this week's budget proposal has floated onto the scene with scarcely a splash.

It spells out a domestic agenda of mostly incremental adjustments in the status quo. For the most part, the budget makes its points of political principle in small gestures. The great mass of it is more mild and managerial than radical or revolutionary.

``This is a classic incremental budget in a year where we're going to see classic incremental politics - a bit of tinkering here and there,'' says Norman Ornstein, a political analyst at the conservative American Enterprise Institute.

But the leadership in both parties is too distracted by the Gulf war and too reluctant to revisit the budget battles of the fall to open up a broad-scale war over federal spending this year.

``There is a general agreement out there in the policy community not to rock the boat this time,'' Dr. Ornstein says.

The limits set last fall will help keep the grander passions out of the debate by barring trade-offs between domestic programs and defense, notes Stuart Eizenstat, a lawyer and former domestic policy adviser in the Carter White House. ``The budget battles are going to be fought within very narrow parameters,'' he says.

The Bush budget is not at all likely to sail through Congress, however. Cutting the tax rate for capital gains and further trims in Medicare, for example, are still fighting phrases on Capitol Hill.

Most educated guesses are that Mr. Bush will not push too hard on the capital-gains tax cut. He risks drawing return fire on the tax issue - such as a Democratic proposal to levy a surtax on million-dollar incomes. Republicans blocked such a surtax last fall, and polls immediately registered a drop in the party image.

But the Bush budget is not ``dead on arrival'' either, in the phrase commonly applied to Reagan budget proposals sent to Congress. The Bush proposal ``is pretty much what the federal government is going to look like,'' says Scott Lilly, director of the Democratic Study Group, made up of members of Congress.

Mr. Lilly found that in spite of the controversy surrounding many Reagan programs, Congress largely follows a president's lead. On average, Congress cut 0.2 percent out of presidential proposals for discretionary spending during the 1980s.

The greatest change proposed in the Bush budget is up to $22 billion worth of federal programs that are being offered to the states to take over and alter as they see fit. The federal government would continue full funding for the programs, but cut all federal requirements for the programs.

Governors, meeting in Washington over the weekend, found the concept appealing. Liberal Washingtonians were less enthusiastic, since 80 percent of the spending programs the White House is offering to the states are targeted to the poor, and the proposal raises the possibility that some will be curtailed or cut off.

A similar concept, Reagan's New Federalism in 1982, ``went nowhere,'' says economist Gary Burtless of the left-of-center Brookings Institution. Reagan attempted to hand the least popular programs over to the states.

The budget seeks to spread another significant concept into the new regions of federal spending: means testing.

It seeks to raise payments for Medicare services to people with incomes of more than $125,000. The savings is a relatively tiny $40 million out of the roughly $100 billion Medicare program. But it shoehorns in the principle of targeting Medicare to the less affluent.

A central theme in the administration's budget presentation is a stress on long-term investment for the future rather than short-term spending. It runs from building highways to raising education spending.

The one area the Bush administration deserves full credit is in investing in scientific and technological research, Eizenstat says. Big increases have come every year in Bush R&D funds, from agricultural research to the Superconducting Supercollider project, though in most areas, the Bush rhetoric is not matched with very large-scale programs.

The most intensive dispute over the budget and State of the Union message in recent months has been within the Bush administration, between young conservatives led by Housing and Urban Development Secretary Jack Kemp seeking a radical new war on poverty, and more cautious managers led by budget director Richard Darman.

The Kemp faction, whose slogan is ``empowerment,'' got many of its programs in the budget. They back parental choice of public schools, for which the budget seeks to fund demonstration projects. They back tenant management and homeownership for public housing tenants, enterprise zones where business taxes are lower in underdeveloped neighborhoods, and a lower capital gains tax. All get healthy attention in the budget.

A Kemp task force had also recommended that the president expand a tax exemption for children and cut the Social Security payroll tax - both tax cuts aimed at middle- and lower-income families. Bush rejected them.

``It may not be the war on poverty in the State of the Union that the Secretary [Kemp] had envisioned,'' says HUD Deputy Assistant Secretary Thomas Humbert. ``But I think there's enough there in both substance and ideas to be a substantial step forward.''

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