Starting Over: Clinton Targets Taxes, Welfare

Tonight's speech to lay out direction president wants to go to reach out to the middle class

AT two years of age, the Clinton presidency is starting over again.

Tonight, the president plans to present on television his new replotted road map for negotiating the radically reconfigured landscape.

He plans to return to one of the earliest vows of his campaign -

one that was lost in the din of deficit alarm as he assumed the presidency - to cut taxes for middle-class families.

He also plans to revive one of his campaign's plainest signs that he was not a traditional Democrat seeking ways to shift more money to programs for the poor: tough-minded welfare reform.

In returning to his campaign roots, Mr. Clinton is obviously seeking common ground with the new Republican majorities in Congress so that some work can get done in the next two years.

But the president's task is also to begin restoring public confidence in his own ability and commitment to doing what he once said he would do.

After two years in office, Clinton has achieved more than many administrations ever do. His successes in Congress range from signing the Family and Medical Leave Act requiring employers to give new parents and others time off to the GATT agreement liberalizing world trade.

He has also presided over three consecutive years of declining federal deficits - a record since the reign of Calvin Coolidge. The economy is growing about as fast and employing about as many people as can be sustained without overheating and setting off inflation.

Yet Clinton has won few fast friends and supporters. Many liberals feel he is an inconstant, unreliable ally. Conservatives vilify him in harsh, personal terms. And many voters in the middle, according to polls both recently and for a year now, question his competence and trustworthiness.

Early on in his term, Clinton made some decisions about what Americans wanted most from him and what he would work hardest to achieve. He put deficit cutting ahead of a middle-class tax cut. And he put health-care reform ahead of welfare reform.

For more than a year, he has made his ambitious overhaul of the nation's health-insurance system, covering a seventh of the whole economy, the centerpiece of his presidency. It was a high-risk project that washed out completely by September without much remaining popular support.

Now, after a month of absorbing the shock and the lessons of the Nov. 8 GOP landslide, Clinton is mapping out a new agenda - one that is a much closer match to the Republican agenda.

In his speech tonight, Clinton is expected to lay out a new plan to cut taxes for middle-class families. While it is expected to match the thrust of the tax cut proposed by the House Republicans, the House Republican plan is a close copy of what Clinton proposed in his campaign.

That plan is for a $500 tax credit per child for middle-class families. Clinton may add additional elements, such as removing tax penalties for early withdrawal from Individual Retirement Accounts.

The partisan battle lines are forming already over how to define the middle class. House Republicans are discussing making families with incomes up to $200,000 eligible for the cuts. On Tuesday, Democratic leaders in Congress proposed a top limit of $75,000.

Some Democratic strategists like the way this debate lines up. Says consultant Tad Devine: ``The Republicans want tax cuts for the rich. We want tax cuts for the middle class.'' Middle-class voters are squeezed financially, despite high employment, because of stagnant wage levels, he adds, and they see no evidence that anyone is doing anything about it.

``You demonstrate your commitment to putting more money in their pocket by putting more money in their pocket,'' Mr. Devine says.

Clinton's proposal is likely to cost the Treasury about $50 billion a year, and it has set off a scramble throughout the Clinton administration over how to pay for it. The president is still reviewing the possibility of axing a Cabinet department, although a leading candidate - the Energy Department - was reportedly saved with a vow by Energy Secretary Hazel O'Leary to cut her budget by nearly a quarter.

Clinton is considering government cuts on a scale not discussed since the early Reagan administration. Although it is ac-celerating rapidly, this is not a new effort for Clinton. He has reduced the number of civilian employees of the executive branch by 103,493 as of late September, surpassing his campaign promise. The administration is committed to reducing the federal work force by nearly three times that number by the end of 1996.

Clinton only gets a portion of the credit for progress on the deficit and the economy, which were both improving before he took office. But free-trade advocates credit him for completing the work of Republican presidents on the North American Free Trade Agreement and GATT.

These agreements had more Republican than Democratic support. Notes presidential scholar Colin Campbell of Georgetown University here: These turns to the right are ``a harbinger of the Bill Clinton we will see.''

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