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Clinton Rolls Dice With Tobacco Money Bases Popular Budget Items On Congress’ Ok Of Tobacco Deal

The $1.7 trillion budget that President Clinton will unveil today is built on a grand political bargain: Appealing new programs are linked to congressional approval of the national tobacco settlement.

The president’s strategy is also a grand gamble. A significant share of Clinton’s initiatives would be financed with tobacco funds - $65.5 billion over five years - even though the Republican-controlled Congress has yet to enact the landmark $368.5 billion tobacco settlement. The deal’s prospects are far from certain.

But the budget, as described by administration officials, is carefully constructed to set up political tradeoffs that Clinton can use to urge the Congress, with its Republican majority, into action. The choices are clearly set up.

In addition, $22.3 billion in tobacco money over five years would go to the states to use as they see fit, as well as to anti-smoking programs and to tobacco farmers.

Clinton could have chosen another avenue to pay for many of these programs. For the first time since the federal fiscal year of 1969, the government expects to run a surplus. Government officials said the new budget envisions a $9.5 billion surplus next year, growing to a cumulative $218.7 billion surplus in 2003.

But the president’s decision to use tobacco funds to bankroll $65.5 billion in federal programs over that five-year period is one of the devices he used to propose new spending while preserving the surplus. The surplus, Clinton has said, will be devoted to shoring up the Social Security system as those in the the baby boom generation approach retirement.

Even if the Congress ultimately fails to enact the tobacco deal, thereby killing the president’s new programs, Democrats can come away with a potent political issue, Clinton’s aides said. They will accuse the Republicans of favoring the tobacco industry over children and health.

“This year this Congress has a choice to make,” said Rahm Emanuel, Clinton’s senior adviser. “They can either stand shoulder to shoulder with corporate tobacco and their profits or protect our children and insure their health and safety.”

Republicans, who receive far more in campaign contributions from the tobacco industry than do Democrats, are already angry over the trap that Clinton has set for them.

At a recent appearance before the U.S. Chamber of Commerce, Sen. Trent Lott of Mississippi, the majority leader, said he had told Clinton: “Mr. President, oh yeah, you’ve got it set up great. If we don’t do anything, you’re going to attack us saying, ‘Oh, well, you’re just trying to look after your tobacco friends.”’

Clinton’s aides say his assumption that $65.5 billion can be raised from the tobacco industry is consistent with a call he made last year for a $1.50-per-pack hike in cigarette prices over the next decade to discourage teenage smoking.

But just as Clinton has never proposed any legislation to put the tobacco settlement in place, his budget is silent on whether the money should be raised through a cigarette tax, industry penalties or voluntary payments. That decision is left to Congress.

Many lawmakers still believe that some tobacco legislation will ultimately be enacted. Sen. Frank Lautenberg, D-N.J., involved in both the budget and tobacco issues, said a legislative package might not come together in time for Clinton to realize the $9.8 billion in tobacco money he is counting on in 1999. But he added, “There is no doubt in my mind that we’re going to see some tobacco legislation, so I think it’s realistic.”

Still, many factors are imperiling the settlement in Congress.

When state attorneys general and tobacco company lawyers first unveiled their agreement, its terms seemed staggering. In exchange for getting immunity against many liability suits, the tobacco companies would pay $368.5 billion over 25 years and voluntarily limit their marketing practices. But to be enacted, the settlement has to be approved by Congress.

Since the agreement was announced, the political environment has only become more hostile for the tobacco companies. The industry took a hard beating last month with the public release of documents from the R.J. Reynolds Tobacco Co. that showed that the company, a subsidiary of RJR Nabisco Holdings Corp., had aggressively courted young smokers, some as young as 14.

Now Republican leaders have joined long-time foes of tobacco in distancing themselves from the immunity provisions in the settlement.

xxxx SMOKY NUMBERS Tobacco funds would pay for these initiatives: States: $1.2 billion in the new fiscal year and $7.5 billion over five years would be given in grants for child-care and child-development programs. Schools: $1.1 billion in the next fiscal year and $7.3 billion over five years would be used to hire 100,000 new teachers and reduce first-grade, second-grade and third-grade class sizes. Medicaid: In an effort to enroll more lower income children, the federal health insurance program for the poor would be financed with $900 million over five years. FDA: $1.2 billion would be used over five years. Health: At the National Institutes of Health, more than $25 billion over five years would be distributed in research funds. The Centers for Disease Control and Prevention would get $400 million over the same period to fight smoking. Another $800 million would pay for trials of cancer therapies among Medicare patients.

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