Washington's Budget Balancing Act

Potential surplus leads Congress to ask: What should we do with the extra money?

This year's budget tussle between Republicans and Democrats has quickly become a fight over the best way to put money in Americans' wallets: the specific, or the general.

The debate is as much political as economic. Both parties pay homage to a balanced budget. But while President Clinton proposes new social spending, Republicans say Americans would benefit most from paying down the debt or cutting taxes - or both.

Mr. Clinton offers programs aimed at solving particular middle-class problems: tax credits for out-of-home child care, expansion of Medicare to certain people aged 55 to 64, and more money for teachers and school repairs. He also proposes setting aside any surpluses that might accumulate to replace borrowing from the Social Security trust fund, although he doesn't specify how to do it.

But Republicans say American families would benefit more from a smaller federal debt, which would free up funds for investment and help Social Security; a tax cut, which would place more cash in Americans' pockets to spend as they see fit; and from a smaller government that interferes less in people's lives.

"What the president has done here is present a brilliant political document," says Robert Reischauer, a budget expert at the Brookings Institution and former director of the Congressional Budget Office. "He's laid out a menu of initiatives that are both popular with the American people and consistent with priorities the administration has had since 1993 and that present a good set of issues for congressional Democrats to run on in November."

Republicans criticize the president's budget as a return to the "tax-and-spend" policies of the past. Senate Budget Committee Chairman Pete Domenici (R) of New Mexico says the Clinton budget would create the highest level of taxes since World War II and includes more than $125 billion in new spending.

"Quite clearly he has put the Republicans on the defensive," Mr. Reischauer says. "They can't frontally assault his initiatives. They either have to come up with their own versions or resort to what they have done, which is to say this is just big government all over again."

Republicans however, scoff at the notion that the president has them on the ropes.

"My guess is that most people don't even remember what the president said in his State of the Union address," says John Feehery, a spokesman for House majority whip Tom DeLay (R) of Texas. "We're staying very focused on our agenda."

Clinton has complicated the budget debate, however, by proposing to pay for his new programs through money from the tobacco settlement. That deal, negotiated last year by the cigarette companies and 40 state attorneys general, calls for the companies to pay hundreds of billions of dollars in damages to state and federal governments and limits tobacco advertising in exchange for broad immunity from further liability lawsuits.

Republicans denounce the president's move as pure politics. "The president has taken the engine and thrown it on the table without the car," complains a House GOP leadership aide.

At any rate, the deal is stalled in Congress and prospects for passage are dim, congressional leaders say. Many Democrats are loath to give tobacco companies immunity, while an increasing number of Republicans are unwilling to defend the firms in light of revelations that the companies actively marketed cigarettes to young teenagers. In addition, the logistics of moving the unusually complicated settlement through the various committees of both chambers may simply be more than the institution can handle.

What looks likeliest, sources say, is that Congress will break the deal into pieces and pass some of them, including a possible tobacco tax.

While Republicans are determined to act on tobacco, they insist that any resulting revenues would go to pay for anti-teen-smoking campaigns and smoking-related public-health measures, not for new spending proposals. Indeed, Senator Domenici has called for any tobacco revenues to be put toward keeping Medicare solvent.

Some say the best approach might be for Congress to do nothing and stick to last year's budget deal. "The budget is in balance if we do nothing and the economy continues to perform as it has," Domenici observes.

"What our political system does best is nothing, inaction," Reischauer says. "When you have deficits, this attribute is damaging; when you have small and growing surpluses, it's a virtue."

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