Agreement Near To Balance Budget By 2002 Plan Also Cuts Taxes, Restricts Medicare Spending

President Clinton and Republican leaders neared agreement Thursday on the outlines of plan that would balance the federal budget in 2002 while cutting taxes by $135 million and imposing new curbs on Medicare and Social Security spending.

Elements of the far-reaching plan still were being negotiated late in the day as Clinton administration officials and GOP congressional leaders wrestled over final details of the tax cut and began trying to build support for the deal among their rank and file.

Despite criticism from congressional members from both parties - including House Minority Leader Richard A. Gephardt, D-Mo. - proponents of the emerging accord predicted it will win broad support when formally unveiled, perhaps as early as today.

“The far edges of the chamber may not like what is about to happen,” said Rep. Billy Tauzin, D-La., “but the great center … is applauding the extraordinary progress that’s been made.”

Highlights of the tentative agreement include:

A phased-in $500-per-child tax credit for families.

Cuts in taxes on some estates and asset sales.

An estimated $32 billion for expanded health coverage for needy children and for other Clinton domestic initiatives, including $10 billion for disabled immigrants who lost benefits under last year’s welfare reform law.

Increased spending on schools and the environment.

Negotiators also agreed to a technical change in the government’s inflation index that could mean smaller increases in Social Security and other federal benefits. Overall, this move - which would change the way the Bureau of Labor Statistics computes the Consumer Price Index and likely would spark opposition from organized labor and senior citizens lobbies - could save as much as $55 billion over five years.

White House officials were cautious Thursday night in describing the budget talks, especially since the negotiations were being viewed with deep suspicion by many congressional Democrats who remain skeptical about the size of the tax cuts and spending limits affecting Medicare and other programs.

Administration negotiators also were concerned the tax cuts could spark an explosion of the deficit after 2002. And they sought assurances new tax breaks for higher education - some form of Clinton’s proposals to provide a $1,500 tax credit and $10,000 tax deduction for college tuition - would become law.

One White House official saw the process concluding “in a cloud of dust” as the two sides brawl over the final 2 yards in the long and tortuous path to a budget deal.

But by late Thursday, White House aides acknowledged that the basic framework of a deal is at hand.

“It represents a framework that protects the priorities we have articulated,” said Senate Minority Leader Tom Daschle, D-S.D., after being briefed by the White House. “At this point, a majority of (Senate Democrats) would support this agreement.”

But in the House, the plan can expect stiff opposition from some Democrats. Gephardt complained: “It’s unfortunate that this has not been a budget summit arrangement that has included House Democrats. It does not give me great optimism or confidence that you’ll get enough Democrats” to back the plan.

Expressing a similar frustration, that written concerns liberal Democrats have about the plan had been sent to Clinton but seemingly were ignored, Rep. Barney Frank, D-Mass., said: “We addressed it to the Democratic president of the United States and it came back ‘addressee unknown.”’