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Senate Budget Committee Makes Cuts In Clinton's Five-Year Spending Plans

Democratic leaders surprised by move to slash $26.1 billion from Clinton plan

BUDGET-CUTTERS aren't giving up.

Only one hour after the House of Representatives decisively rejected the balanced budget amendment, deficit fighters scored a surprising victory on the other side of Capitol Hill.

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The Senate Budget Committee, over the opposition of its chairman, Sen. Jim Sasser (D) of Tennessee, whacked $26.1 billion out of President Clinton's five-year spending plans.

The committee action shocked Democratic leaders, and it puts the president on notice: Public pressure to cut red-ink spending remains strong, even though the balanced budget amendment lost.

During the amendment debate, Sen. Robert Byrd (D) of West Virginia and House majority leader Richard Gephardt (D) of Missouri argued that it wasn't necessary - that Congress can cut deficits without it.

Sen. Paul Simon (D) of Illinois, an amendment supporter, says that thesis will be tested. Under the proposed Clinton budget, this year's federal deficit of $235 billion would shrink to $176 billion next year and $173 billion in 1996.

That's good, but is it good enough? The president says yes. But two things worry many members of Congress in both parties as they look down the road.

First, the economy is relatively strong, so why is the United States still running a deficit this large? Paul Volcker, former chairman of the Federal Reserve, says that in good times like these, the government should actually be striving for a surplus.

Second, even with eventual savings from health-care reform, the deficit begins growing again in 1997. By 2005, the deficit could explode just as baby-boomers begin collecting their Social Security checks.

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Many members, such as Sens. Hank Brown (R) of Colorado and Bob Graham (D) of Florida, say more must be done. So deficit-fighters are proceeding on at least two tracks in Congress.

Short-term, the Senate Budget Committee would trim outlays modestly - $1.6 billion below Clinton's budget in fiscal year 1995. Those cuts would grow in later years - $5.4 billion below the Clinton budget in 1996, $5.6 billion in 1997, $5.3 billion in 1998, and $8.1 billion in 1999.

While the action may seem modest in light of next year's projected $176 billion deficit, budget cutters see it as an attainable goal with bipartisan support, even if the White House objects.

Longer-term, members are looking for significantly larger savings, as well as new taxes, to bring the deficit down to zero. On Friday, a bipartisan group of senators met informally to hear ideas from well-known analysts, including Mr. Volcker, former Sen. Warren Rudman (R) of New Hampshire, Herbert Stein of the American Enterprise Institute, and Henry Aaron of the Brookings Institution.

Mr. Rudman, who co-chairs the Concord Coalition, a group dedicated to eliminating the budget deficit, warns that beginning around the year 2000, a ``generational dispute'' will erupt as tax rates on working people skyrocket to pay for a growing population of retirees.

The result will be ``a political situation [that] is untenable'' unless Congress takes steps soon to bring down red-ink spending, he says.

Sen. Bob Kerrey (D) of Nebraska suggested that one way to control spending could be a cap on outlays for various entitlements, which are the fastest growing part of the federal budget.

Rudman suggested that a better alternative - one supported by the Concord Coalition - would be means-testing for entitlements, including Social Security and Medicare. Persons over a certain income level - Rudman suggested $40,000 a year - might be required to pay a portion of the insurance costs for Medicare, for example.

Such decisive moves are rejected by White House economists. They argue that clamping down on entitlements, or further lowering federal spending, could reduce consumer spending, cripple the economy, and throw large numbers of Americans out of work.

Dr. Volcker was more sanguine. ``I've never had a sleepless night about the Senate doing too much deficit reduction,'' he quipped.

Dr. Stein makes a similar point on this issue.

Reducing federal outlays would create very little short-term risk to the recovery, he says. Indeed, a lower deficit could increase investments, lower interest rates, and result in even more jobs.

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