Clinton Says Plan Hurts States, May Cause Recession

President Clinton warned Friday that Medicare, Medicaid and education cutbacks in the compromise Republican budget plan would increase the fiscal burden on the states and risk an economic recession.

“I believe that their plan is still too extreme, runs a significant risk of putting the economy into a recession and raising unemployment,” the president said in a conference call with five Democratic governors.

Clinton’s comments underscored his deep differences with the Republican congressional majority on economic policies. They set the stage for expected confrontations on tax and spending measures over the next few months and continue into the 1996 presidential campaign.

And Clinton’s warning about a possible recession came as signs of an economic slowdown are prompting leaders of each party to place the blame on the other’s economic policies.

Republican leaders predicted Congress would vote next week to approve the plan agreed to by Senate and House negotiators on Thursday. It calls for a balanced federal budget by 2002 and includes the sweeping spending and tax cuts the GOP promised during last fall’s congressional elections.

“This budget finally turns off the out-of-control, big-government spending machine and puts us onto a responsible path to prosperity America can rely on well into the next century,” Senate Majority Leader Bob Dole, R-Kan., said Friday.

The GOP’s seven-year budget plan calls for $245 billion in tax cuts and $898 billion in spending cuts, including $270 billion from projected Medicare spending, $180 billion from projected Medicaid spending and elimination of the Commerce Department.

Sen. Pete Domenici, R-N.M., chairman of the Senate Budget Committee, said the compromise provides that tax cuts would occur only after spending cuts were insured. “I’m absolutely confident of this process,” he said.

But Clinton reiterated the Democratic contention that the GOP plan “cuts Medicare beneficiaries in order to pay for large tax cuts that disproportionately go to the most well-off people in our country who don’t really need them.”

Unlike most legislation, the budget plan does not need the president’s approval. However, the specific spending and tax bills required to carry out the budget will have to be approved by both Congress and Clinton, raising the prospect of a sharp confrontation unless there are serious compromise talks at that time.

“The hard part is going to be to put that blueprint into action,” said Senate Minority Leader Tom Daschle, D-Ind. “I think they’re going to have a very hard time doing that and, if I have any opportunity to convince the president, I would hope he holds the veto pen very strongly.”

Initial reaction from Republicans indicated the budget was likely to pass. “I think you’ll see most of the conservatives go along with this,” said freshman Rep. David McIntosh, R-Ind., who had led the fight for larger tax reductions.

Sen. Jim Jeffords, R-Vt., who has backed Clinton more than other GOP senators, said it was “quite conceivable” he would oppose the plan because the $10 billion it envisioned in student loan cuts was too deep.

But Sen. Trent Lott, R-Miss., the Senate GOP whip, said the budget plan would “pass easily.”