The federal budget crisis deepened Monday, with vetoes of spending bills by President Clinton, alarm in the financial markets at the impasse and new signals that federal workers sent home may be denied pay.
In what analysts called a resoundingly negative reaction to the stalemate, Wall Street sent stock and bond prices down sharply one day before the Federal Reserve Bank’s policy-making panel meets to consider cutting short-term interest rates.
The Dow Jones industrial average fell 101.52 points, or 1.96 percent, to 5,075.21, its largest percentage decline in two and a half years. Even sharper declines were felt in the NASDAQ composite index, which is rich with the technology companies that have fueled much of the stock market’s gains this year.
Amid the political and financial clouds, a possible bright spot emerged in the form of an invitation from Clinton to House Speaker Newt Gingrich and Senate Majority Leader Bob Dole to meet at the White House today to explore prospects for diffusing the crisis.
“We’re going to have a 30-minute private conversation … just the three of us,” Gingrich told reporters.
In offering for the first time to participate directly in the budget negotiations, Clinton proposed two options for the talks.
In the first, according to White House press secretary Michael McCurry, Clinton proposed that if the Republicans agreed to drop their insistence on using Congressional Budget Office estimates to balance the budget in seven years, he would agree to join the talks personally, with no preconditions and everything negotiable.
The second scenario offered by Clinton was for Republicans to accept the president’s proposed spending levels for Medicare and Medicaid. In return, McCurry said, Clinton will offer a seven-year balanced-budget plan based on the economic projections of the nonpartisan Congressional Budget Office.
As of Friday, congressional Republicans want to scale back projected Medicare spending by $200 billion over seven years. Clinton wants cuts totaling $124 billion. On Medicaid, the GOP wants to trim $110 billion; Clinton, $54 billion.
The two leaders side-stepped making a choice between the two Clinton alternatives.
“We’re not discussing either option,” Gingrich told reporters.
In a joint statement issued Monday night, the GOP leaders said of the scheduled meeting with the president: “We do not view this as a negotiating session, but as an opportunity to discuss face-to-face the importance of getting a balanced budget agreement this year, and how we might achieve that goal.”
Dole told his Senate colleagues he considered Clinton’s offer, “a step in the right direction. I think it’s time for the principals to become involved.”
Both sides spent much of Monday hardening their positions.
Monday morning, the president wielded his veto pen against two bills that would have provided funding and thus reopened portions of the government, one for the Interior Department and other agencies; the other for the Department of Housing and Urban Development, the Environmental Protection Agency and the nation’s space agency, among others.
“They have sent me legislation that would give our children less clean drinking water, less safe food, dirtier air…,” Clinton said as sixth grade science students looked on. “If I signed these bills, I would be condemning more than 10 million children under the age of 12 to living near toxic waste sites that might not be cleaned up for years.”
The same bill would have eliminated Clinton’s national service program, while the other one would have scaled back spending on federal arts and humanities programs by 40 percent.
The White House said Clinton would veto a third spending measure today that seeks to cut his cops-on-the-street program. The president said the GOP was demanding he accept “seven long years of unacceptable cuts” as the price for balancing the budget.