The Tech - Online EditionMIT's oldest and largest
newspaper & the first
newspaper published
on the web
Boston Weather: 34.0°F | Fair

House Approves Clinton Plan to Raise Taxes, Slash Defecit

By Eric Pianin
The Washington Post

WASHINGTON

The House Thursday nightapproved 243-183 the broad outlines of President Clinton's five-year economic plan, a new Democratic vision for reinvigorating the economy and reducing the deficit by $510 billion that would require a huge tax increase, bruising cuts in defense and major "investment" spending.

Under the plan, adopted as part of a multi-year budget resolution, Pentagon spending over the next five years will be slashed by $115.7 billion more than was recommended by President George Bush -- a move that will cause widespread layoffs in the defense industry and fuel additional base closings.

To help finance Clinton's domestic spending initiatives and to reduce the deficit, the budget resolution also would net about $249 billion in new revenue, one of the largest tax increases in U.S. history.

The Democrat-controlled House also moved toward approval of a $16.2 billion economic stimulus package, after opposition from Rep. Charles W. Stenholm, D-Tex., and other conservative Democrats melted in the face of vigorous last-minute lobbying by Clinton and congressional leaders.

Clinton was up until midnight Wednesday telephoning House members to solicit support.

"The president is a very powerful lobbyist," said Stenholm, who was blocked by the leadership from offering an amendment that could have eliminated more than half the stimulus. "We struck out."

The Senate, which is debating its version of the budget resolution, is likely to vote next week on the resolution and the stimulus package. Sen. Herbert H. Kohl, D-Wis., notified the Senate leadership Thursday that he intended to offer a variation of Stenholm's amendment.

Asked if he would be able to deliver Senate Democrats in support of Clinton's stimulus package, Senate Majority Leader George J. Mitchell, D-Maine, said, "I have never failed once in 13 years in the Senate to deliver my vote. And that's about as far as I'm prepared to go now."

The vote on the House budget resolution, coming barely a month after Clinton unveiled his plan, marked a major victory for the new president, who has staked the success of his administration on swift enactment of his short- and long-term economic strategies.

It also marked a sea change in the national economic debate. Instead of the trickle down philosophy of Reaganomics and conservative distrust of government activism, the Clinton program links economic growth to aggressive intervention in the public and private sectors and favors targeted new spending -- what Clinton calls investment -- over consumption.

"There's a new breeze blowing here," said Rep. Robert E. Wise Jr., D-W.Va., a leading House liberal, in defending the plan.

House Republicans blasted the Democratic plan as more of their old "tax and spend" policies. They argued that Americans eventually will reject Clinton's approach, notwithstanding the November election results and polls showing widespread public support for the Democratic plan.

Rep. Richard K. Armey of Texas, a Republican leader, said the president's plans for raising the top income and corporate tax rates and levying a broad-based energy tax would frustrate economic expansion and add to the the deficit.

In contrasting GOP alternatives to Clinton's plan, Armey said, "We ought to grow down the size of government to provide more freedom to grow up the private sector" and generate the tax revenues needed to reduce the deficit.

The negotiations in recent weeks between the administration and conservative House Democrats who demanded more in spending cuts has largely eclipsed concerns about Clinton's fat tax package and the fact that overall federal spending will continue to mount.

Thrsday, Treasury Secretary Lloyd Bentsen had to ask Congress to raise the federal government's debt ceiling to $4.37 trillion from the current limit of $4.145 trillion. He said that the Treasury would reach the current limit on April 7 and he asked lawmakers to act by March 26 to "avoid unnecessary uncertainty in financial markets."

Bentsen said the increase in the debt ceiling should last until Sept. 30, the end of the fiscal year. A longer-term increase in the new debt ceiling would be included in the budget reconciliation bill for the next fiscal year.

The House budget resolution calls for overall spending to grow from $1.5 trillion in fiscal 1994 to $1.78 trillion in 1998, largely as the result of the mounting costs of Medicare and Medicaid and other entitlement programs.

Clinton has proposed new "investment" spending for education, job training, social services, health, science and technology and community and regional development totaling $231 billion over five years. The budget resolution contains about $4.6 billion in new spending for those purposes in fiscal 1994.

The House budget resolution calls for a total of $510 billion of deficit reduction over five years to be achieved by freezing all discretionary spending below 1993 levels, by raising taxes and by saving $8 billion by cutting civil service and military retirement cost-of-living increases.