June 23, 1995 in Nation/World

Republicans Compromise On Spending Seven-Year Budget Plan Ignores Clinton Proposal

David Hess And Robert A. Rankin Knight-Ridder
 

House and Senate Republican leaders agreed Thursday on a seven-year budget plan that would slash federal spending by $983 billion, cut taxes by $245 billion and slam the brakes on the growth in major health care and welfare programs.

The deal features a $500-a-child tax credit for families and a reduced capital gains tax rate on sales of assets.

“We are keeping our promise to return power to the American people,” said House Speaker Newt Gingrich of Georgia as the agreement was announced. “We’ve got a deal, and you’re going to love it. You’ll get more take-home pay.”

The agreement ended several weeks of behind-the-scenes bargaining between House and Senate GOP leaders, largely over the size of the tax breaks.

Thursday’s deal calls for a balanced budget in 2002 and dismisses an alternative budget proposed last week by President Clinton.

The president, insisting that the Republican cutbacks in health care and other social programs would inflict too much pain on beneficiaries, had recommended a 10-year path to balancing the budget.

The budget differences between Clinton and the Republicans could set the stage for a historic clash over the nation’s priorities this fall when the president is presented with bills reflecting the GOP priorities.

The Republican leaders were not concerned about that, however, as they emerged from Gingrich’s office to announce the broad outlines of their agreement.

The tax cut was the hardest part of the agreement to achieve. House Republicans had wanted more than $300 billion in cuts but Senate Republicans had wanted much less, with some even suggesting that tax cuts be delayed until after budget cut savings were achieved.

But Gingrich and other House Republicans clearly got much of what they wanted.

In addition to the $500-per-child tax credit, the budget negotiators agreed on steep cuts in corporate and individual capital gains tax rates, an easing of the so-called marriage penalty for joint income-tax filers, liberalization of Individual Retirement Account (IRA) investments, a tax credit for families that adopt a child, estatetax cuts for small businesses and farmers, bigger tax credits for small business expenses and a lower alternative minimum tax for companies that report no tax liability.

Still to be worked out by the House Ways and Means Committee is the level of family income to be eligible for the child tax credit. Initially, Republicans had proposed the credit for families earning up to $200,000 a year. But that might have to be scaled back to meet budget-balancing requirements by 2002.

The agreement also calls for spending $270 billion less for Medicare and $180 billion less for Medicaid over the seven years. Although spending for both programs would continue to rise, it would be more tightly constrained.

Democrats have charged that the tighter rein on health care spending is necessary in order to pay for the big tax cuts. Senate Minority Leader Thomas Daschle, D-S.D., said his party would “object strenuously” to the GOP’s priorities.

“They’re cutting Medicare, hurting families, hurting the elderly … in order to give a tax break to the people who have it made,” said Richard Gephardt, D-Mo., the House minority leader.

The Republicans also agreed to increase defense spending by some $33 billion more than Clinton had proposed in his budget. That represented a concession by House negotiators, who had wanted a $68 billion boost in military outlays.

To accommodate the tax cuts, the negotiators also had to agree to slash nondefense domestic programs by an additional $75 billion, spread over the seven years, on top of $190 billion in cuts already targeted. This means that education, job training, environmental, transportation and other programs supported by Clinton will have to take even bigger hits.

House Budget Committee Chair man John Kasich, R-Ohio, and his Senate counterpart, Pete V. Domenici, R-N.M., said each chamber would act on the compromise next week - before Congress heads home for the Fourth of July break.

Senate Majority Leader Bob Dole, R-Kan., said the tax cuts would not be authorized until the Congressional Budget Office screened the entire plan.


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