Post-Election, Clinton Economic Team Paints Stark Budget Picture for Congress

DURING the 1992 campaign, candidate Bill Clinton won a major victory on Super Tuesday after charging that his Democratic rival, former Sen. Paul Tsongas, would raise gasoline taxes and trim Social Security benefits.

Now that President-elect Clinton is headed toward the White House, his top economic advisers promise to put "everything on the table" - including higher gasoline taxes and Social Security cuts.

Why has Mr. Clinton turned around? Blame it on the federal deficit, which is "shooting straight up" toward $327 billion in 1993, says Leon Panetta, Clinton's choice to head the White House Office of Management and Budget.

Mr. Panetta and other Clinton nominees for the Cabinet spent the past week warning Congress that controlling the budget deficit will be a daunting task. They spoke of sacrifice, shared pain, and higher taxes. They vowed to put popular programs on the chopping block, if necessary, to bring spending under control.

They also cautioned that the hour is growing late. For example, unless something is done about run-away health-care costs, Medicare and Medicaid alone could drive the federal deficit up to $500 billion within a few years.

Sen. Lloyd Bentsen, the designate for secretary of the Treasury, told his former Senate colleagues that with the deficit numbers climbing inexorably, "time is running out. You don't have a lot of wiggle room left." Work-force investments vital

Robert Reich, the designate for secretary of labor, sees serious dangers ahead for America's hard-pressed work force unless the deficit is checked and investments are made in new jobs. Especially threatened are those without college training. He says many of them are already "on a downward escalator."

All this ominous talk from Democrats puts a new twist on Washington's political culture. Long regarded as the party of special interests, Democrats this week became the champions of sacrifice, and promised to spread the coming burdens among all groups, from the elderly to farmers.

Panetta, a former congressman and well-known `budget hawk', told one Senate committee that the time for tough action is now. The United States has reached "a pivotal moment in history," he told them.

A dubious Sen. William Cohen (R) of Maine challenged Panetta to detail which entitlement programs would be exempt from budget cutting. Would Social Security be spared? Medicare? Medicaid? Deposit insurance? Federal civil service retirement? Food stamps? Veterans benefits? Farm price supports? Family support? Unemployment benefits?

Panetta replied: "Everything is on the table, senator.... I'm not going to start exempting things right now because, frankly, the problem is too great, and I think we need to look at all areas."

He explained that three categories will see cuts: defense, discretionary programs, and entitlements. But Panetta noted that entitlements are of primary concern, especially health care. Tax-cut pledge grows weaker

As the budget deficit rises in importance, several Cabinet designees indicated that the time may be wrong for one of Clinton's favorite campaign promises: A tax cut for Americans making less than $80,000 a year.

Clinton has already vowed to raise taxes on households with incomes over $200,000. However, a middle-class tax cut was the hallmark of his pledge to bring more equity into the tax system.

The middle class particularly felt the impact of higher taxes during the Reagan-Bush years because of a rapid escalation in Social Security levies. Clinton may also have a tougher-than-expected task in chopping the budget deficit in half within four years, as he promised.

But Panetta, Senator Bentsen, and Mr. Reich all indicated that getting the deficit down is priority one. The second priority is making new investments in education, job training, and infrastructure to advance the US economy during the rest of this decade.

Reich expressed growing concern for blue-collar Americans who were once the backbone of dominant US industries like steel, autos, and machine tools. Most of them had not attended college, but they made good wages which could support entire families.

"Unskilled and untrained Americans are losing out," Reich said. "If not competing with low-wage workers abroad, they increasingly are competing with new technologies here at home which are rapidly replacing routine work of all kinds."

The Cabinet nominees emphasized that underlying all their plans for the economy will be an emphasis on growth. Panetta noted that it was the recent recession that drove up the deficit, and cut into tax revenues.

Faster growth means more jobs, lower welfare, higher tax revenues, and a potential reduction in the federal deficit. "Without growth, we won't get that deficit down," Bentsen says.

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