President Clinton said Monday he plans in February to propose the first balanced budget in 30 years, but he warned against enacting any big tax cuts, saying such action would only bring back the deficit.
If Congress approves Clinton’s fiscal 1999 spending plan intact, it would bring the budget into the black three years ahead of the 2002 deadline envisioned in the accord worked out between the White House and Congress last May.
White House officials said Clinton’s new budget would project surpluses at least through 2002 and most likely for several years beyond, barring any major tax cuts or spending increases.
“To somewhat recoin an old phrase, you’ll see surpluses as far as the eye can see,” Clinton’s chief economic strategist, Gene Sperling, told reporters at a briefing.
The president also confirmed that the federal budget deficit for the current fiscal year - which ends Sept. 30 - is likely to be under $22 billion, a figure far below the $58 billion projected last August.
The revision reflects larger-than-expected tax revenues stemming primarily from the booming economy, which outpaced the expectations of even the most optimistic forecasters last year and seems likely to do so this year as well.
Clinton’s budget director, Franklin D. Raines, said the tax windfall has come across the board - from corporations, individuals and investors who pay capital gains taxes.
The president’s warning about the dangers of enacting a major tax cut too soon was designed to head off efforts by some GOP congressional leaders to push through such a reduction this year, before there is a guarantee that the deficit will disappear as projected.
“We can project a surplus (for fiscal 1999), but we don’t have one (yet),” the president said at an inpromptu news conference. “We cannot take risks with the future that we have worked so hard to build.”
But Clinton warned Monday that proposals to use up the projected surplus by enacting tax cuts or spending programs for fiscal 1999 would only risk jeopardizing the projected surplus, and could even force the budget back into deficit.
Although White House officials insisted Monday that Clinton’s new programs would either be self-financing or would not disturb the projected surplus, the analysts said the president’s proposals would be almost certain to spark rival plans from Republican leaders.
Clinton and his top budget advisers sidestepped questions about reports that he is planning to propose up to $10 billion a year in new cigarette taxes as part of a program to discourage smoking among young people.
Raines told reporters any legislation proposed to deal with the tobacco issue would likely include “a substantial revenue component,” but he declined to say how much in new taxes it would be designed to bring in.
At the same time, Raines asserted that the modest surpluses that Clinton will be projecting for fiscal 1999 and later would not be dependent on any increases in tobacco taxes. “The tobacco legislation will be self-contained,” he told reporters.
The debate over how to spend the still-unrealized budget surplus is expected to become the major legislative battle in the congressional session that convenes later this month, as both parties scramble to use any excess to cement their own agendas.
Critics also warn that the budget surplus may not even come about if the economy slows more sharply than most economists expect and the surge in tax revenue declines. Some analysts warn that the U.S. economy may be hurt as a result of the Asian financial turmoil.
Also today, Clinton will propose allowing Americans to buy into Medicare before they are 65. The White House plan is similar to an option offered by Social Security, in which people can spread their pension benefits over a longer period, starting at age 62 instead of 65.
The idea would be to let some Americans who are 62, 63 or 64 pay a monthly premium - likely to be between $300 and $400 - to get government health insurance through Medicare. Also, once they became fully eligible for Medicare at age 65, people who bought in early would pay slightly higher out-of-pocket fees than those who didn’t.
xxxx Declining deficit The budget deficit for the 1998 fiscal year, which began last Oct. 1, now is projected to be less than $22 billion, the smallest since 1974. The budget, which has been in the red since fiscal 1969, hit a record $290 billion deficit in 1992. It has declined ever since. Private analysts now say the strong U.S. economy should generate treasury surpluses of $20 billion to $50 billion a year perhaps as soon as fiscal 1999. - From wire reports