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Budget Plan Has $223 Billion in Cuts -- and Some Illusion

By John M. Broder
Los Angeles Times


President Clinton's economic blueprint contains a purported $223 billion in federal budget cuts over the next four years, money that would be used to reduce the federal budget deficit and to help further his vision of an economically sound America.

But there is far less there than meets the eye.

While Clinton's $169 billion in spending increases are real and likely to win relatively easy approval in Congress, many of his budget cuts are illusory at best.

Some of the changes that the administration counts as cuts, such as taxation of some Social Security benefits and the imposition of fees for a variety of government services, are actually feebly disguised tax increases.

And many of the proposed cuts are in politically sacred items such as the Tennessee Valley Authority and farm subsidies that are unlikely ever to be enacted.

Other large reductions come from projected savings from lower interest payments on the national debt -- $24 billion. But that figure is based on optimistic projections of the effect of the entire budget package and may never materialize.

The bulk of the savings come from two programs -- defense and payments to doctors and hospitals under Medicaid and Medicare.

And those are represented by powerful entrenched interests who are unlikely to yield without a fight.

"Listen," said Office of Management and Budget Director Leon E. Panetta. "Every one of these provisions has some kind of powerful backer on Capitol Hill. Who are we kidding?"

Panetta, sensing the battle ahead and the likelihood that the president's package would be picked apart on the Hill, issued a challenge to his former colleagues in Congress.

"If there are those that think it can be done differently, then let's hear the specifics. Don't give me balanced budget amendments. Don't give me some kind of gimmick. Talk to me about specifics and we'll listen," Panetta said. "But if you're just going to give me your regular speech that you give at the Rotary Club, forget it."

Of the $223 billion in cuts, $21.4 billion is actually an increase in taxes on moderate- and high-income Social Security recipients. Another $11 billion in purported program cuts actually would be achieved through higher user fees on timber sales, agriculture programs, meat inspections, securities registration, harbors and waterways, grazing rights, irrigation water, parks and recreation sites, hard rock mining, private aircraft landing rights and trademarks and patents.

Defense cuts total $88 billion over the four years, while reimbursements to doctors and hospitals under the Medicare and Medicaid programs will be trimmed by more than $38 billion.

That leaves $75 billion in cuts, for which Panetta and aides scoured the $1.5 trillion budget looking for candidates. Clinton himself did the final carving, Panetta said.

Among the larger items is a one-year freeze on federal employee salaries and below-inflation pay increases for 1995-97, for a savings of $8.3 billion. Included in the figure is elimination of "locality pay differentials" -- meaning that FBI agents in high-cost cities such as Los Angeles would be paid the same as those in Casper, Wyo.

The administration hopes to save another $8 billion by cutting the federal workforce by 100,000 employees and yet another $8 billion by unspecified "administrative savings." Government "streamlining" would yield savings of $8 billion.

Although it is a small item -- $200 million -- a 14 percent cut in federal funding for campus-based financial aid programs in 1994 seems to run contrary to Clinton's other education goals. The aid programs provide supplemental grants, loan capital and money for work-study plans for college students.

The $1.2 billion left in the program would be frozen, instead of increasing gradually, over the next few years. So, by 1997, the projected savings will be $275 million, Department of Education officials said.

The Department of Housing and Urban Development is cutting $565 million in "special purpose grants." Those programs are described in internal government budget documents as "pork items" added by members of Congress.

At the Department of Transportation, $1.3 billion in "lower priority programs and projects" (read: pork barrel projects) are being slashed.

At the Department of the Interior, $163 million in "lower priority water projects" are being eliminated.

Clinton, knowing that such local projects are the coin of re-election, is girding for a hundred little battles on Capitol Hill, even as he fights one big one on tax increases. Democrats will demand fewer cuts, saying that they cause too much pain. Republicans will demand deeper cuts and smaller tax increases, saying that taxation strangles enterprise. And everyone will say cut somewhere else.

"This economic plan can't please everybody," Clinton said in his address to the nation Wednesday night. "So I ask you all to begin by resisting the temptation to focus only on a particular spending cut you don't like or some particular investment that wasn't made. And nobody likes the tax increases, but let's just face facts. ... We have got to play the hand we were dealt and play it as best we can."