Clinton Unveils Ambitious Budget Gop Says President’s Outline To Erase Deficit Is A Starting Point, But Skeptical Of Increased Spending

President Clinton on Thursday outlined a five-year federal budget plan that, he said, would erase the deficit by 2002, cut taxes for families, curb Medicare growth and increase spending on education.

The president maintained his blueprint, once fully in place, would set the nation on the path to a balanced budget for two decades. The nation last had a balanced budget in 1969.

Clinton said his budget proposal “will spur economic growth, promote education and our other priorities and eliminate the federal deficit for the very first time in three decades.”

The plan calls for savings of $250 billion over five years, leaving a $17 billion surplus in 2002.

The proposal sets the stage for a rematch with the Republican majority in Congress. Both sides sense the possibility of a deal, but neither side wants to compromise yet.

“There are still differences between the parties about how we should do this. But I am convinced those differences can be bridged,” the president said as he explained his budget to reporters.

“We’ve got the best chance in a generation to do it. I intend to do everything I can, everything I can over the next few months to see that we achieve this goal,” Clinton said.

Republicans, while not enthusiastic, did not declare Clinton’s budget dead on arrival.

“This is not the bold step we were hoping for,” said Senate Budget Committee Chairman Pete Domenici, R-N.M. “But if the administration is serious about sitting down and working with Congress, it may be a first step toward a balanced budget.”

Domenici and Rep. John Kasich, R-Ohio, the House Budget Committee chairman, challenged Clinton’s claim of deficit elimination by 2002, saying his budget could be $50 billion in the red by that date.

House Majority Whip Tom DeLay, R-Texas, gave a harsher assessment.

“The administration has embarked on a journey to Shangri-La, a mythical place where spending goes up, where the future is of no consequence, where the world is at peace and where budgets magically balance with a wave of the hand,” he said.

Republicans want greater tax cuts, more spending for the military and more cutbacks in federal programs.

The president will meet with congressional leaders of both parties on Tuesday.

In the past four years, the deficit has fallen from a record $290 billion for 1992 to $107 billion for 1996. The 1997 deficit, however, is expected to rise to $126 billion before falling slightly to $121 billion under Clinton’s proposed 1998 budget. It would decrease annually thereafter.

The 1998 fiscal year begins Oct. 1.

Annual spending under Clinton’s proposal would continue to increase over the next five years, from $1.69 trillion for 1998 to $1.89 trillion for 2002.

Clinton’s plan calls for $98 billion in tax cuts for families over five years, including a $500-per-child tax credit for young children, a $1,500 tax credit for the first two years of college tuition, a $10,000 tax deduction per family for higher education costs and removal of most capital gains taxes on the profits from home sales.

The bulk of the $250 billion in savings over five years comes from Medicare, the health insurance program for the elderly. Clinton proposes a $100 billion cutback in Medicare growth over five years and $138 billion over six years. He also proposes a $22 billion reduction in Medicaid growth, gaining savings mostly through a cap on per-person expenditures. About $13 billion of the Medicaid cutbacks would be recycled into health programs for children.

Franklin Raines, director of the Office of Management and Budget, said 250 government programs would be eliminated.

The budget plan would raise $76 billion by clamping down on corporate tax loopholes and by extending some taxes that have expired, such as the airline ticket tax.

The plan would hold defense spending to $259 billion for 1998 but postpone key financial decisions, such as troop levels and new armaments. Clinton asked for $1.5 billion to continue peacekeeping operations in Bosnia.

The president also asked Congress to repay the more than $1 billion owed to the United Nations - an issue likely to prove contentious.

The budget calls for spending increases for public schools, the environment, science and technology, children’s health care and crime fighting.

It would add $18 billion to welfare programs to pay for the restoration of benefits to disabled legal immigrants.

In an effort to avoid past battles over whether the budget would be based on the administration’s economic forecasts or on Congress’ predictions, the five-year plan contains a provision that would halt about $22 billion in tax cuts and allow for an across-the-board reduction in all programs except Social Security should the annual deficit-reduction goals not be reached by 2001.

2. The deficit