The Budget Squeaker
PRESIDENT Clinton's victory in getting his budget resolved and passed by Congress is great - not least because a defeat would have wounded his young presidency. As it is, the White House and Democratic leaders summoned just enough strength to pass the complicated blend of tax increases and spending cuts in a political cliffhanger, with Vice President Al Gore Jr. casting the deciding vote.
There are many questions and doubts about the final package. The main question asked by Washington of the Democrats, "Can they govern?," has not been ringingly answered by the outcome. However, the Clinton White House did show that in the face of deepening public distrust in Washington, often out-of-control deficit spending, and the power of special interests, that it could respond and get something done. The budget package is an important first step.
The debate around the budget compromise ought to put to rest the tired Reagan saw that the answer to deficit spending can be settled purely by cutting "government." True, agricultural subsidies and various pet pork projects remain to be trimmed. But these pale in comparison with the real budget juggernauts - entitlements. Social Security, Medicare, and Medicaid comprise more than half the budget, and are growing dramatically.
Concern about the budget's $496 billion deficit cut can't be ignored. Will even the modest taxes and deficit cuts cause economic downturn such that government revenue falls short of White House expectations - causing the need to spend even more?
Yet the issue of market response and public faith in Washington must be considered. If Clinton did not deliver on his promise to reverse the deficit, the bond markets could be harmed; a loss of confidence in the political process could drive up current favorable interest rates.
The Democratic leadership early failed to include moderate Republicans ready and willing to support the new president. They should be wooed now - and brought back from the carping that has characterized their approach.
What Clinton and the Democrats most need to do, as the budget is further refined, is to restore the focus on investment and industrial policy at the heart of the original Clinton economic plan. The focus on investment supports small business and America's most progressive high-tech capacities. Investment got obscured this spring when Clinton lost his stimulus package. He needs to get it back.