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OMB Chief Hits Republican Tax Cut Plan

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  • Full Coverage: The Tax Bill
  • By John F. Harris
    Washington Post Staff Writer
    Saturday, August 14, 1999; Page A7

    President Clinton's senior budget adviser said yesterday that Republican budget plans are as "phony as a three-dollar bill," because they envision cuts in domestic spending over the next decade that as a practical matter the public would probably never allow.

    As Clinton left town for a long weekend, Office of Management and Budget Director Jacob "Jack" Lew and other senior members of the administration's economic team tried to open a new front in the battle with Republicans over their $792 billion tax cut.

    Clinton and his aides have until now emphasized how the 10-year tax cut would deplete a projected federal budget surplus that is needed to ensure the long-term health of Social Security. But, in their latest assault, Clinton's aides say they assume that Republicans will try to make good on their pledge to preserve in a "lockbox" that portion of the surplus generated by Social Security taxes so all of it can be used to shore up the popular retirement program.

    The inevitable result, said Lew, would be grievous cuts in the so-called discretionary portion of the budget that goes to fund most agencies of the government. Assuming that Republicans want to match the increased military spending that Clinton has proposed, they will have to cut spending by 50 percent for virtually every other agency of government.

    If implemented, said Lew, "this becomes a beast that would eat us alive."

    Realistically, Lew and National Economic Council Chairman Gene Sperling said, such cuts in non-entitlement, non-defense spending probably would never materialize. But to avoid them, the officials argued, Republicans would be forced to return to an era of deficit spending that the country left behind only a year ago.

    "Even [the administration's proposed] numbers on domestic spending are pretty tight," said Sperling. "Fifty percent cuts for the FBI or veterans, or education, are pretty hard to imagine."

    Republicans have labored unsuccessfully this year to pass annual appropriations bills that fall within the spending caps jointly agreed to by Clinton and Congress in the 1997 balanced-budget agreement. The restraints become even more burdensome over the next decade.

    Republican congressional officials dismissed the White House briefing as rhetorical gamesmanship. The GOP's long-term spending plans preserve enough money to keep total discretionary spending constant, said Bruce Cuthbertson, press secretary for House Budget Committee Chairman John R. Kasich (R-Ohio). "This is the same song and dance that you get from a White House that never wants to cut taxes," he said. "We believe that a $792 billion tax cut over 10 years is very doable."

    These exchanges are largely academic, because Clinton has pledged to veto the GOP tax cut bill when it reaches him next month. Both sides are simply laying down their public rationales for that inevitable conflict.

    The main question is what happens after the veto. Sperling and Treasury Secretary Lawrence H. Summers made clear that, while Clinton is prepared to negotiate with Republicans over a smaller tax cut in the neighborhood of $250 billion over 10 years, he is also perfectly content to walk away if Republicans do not come down to his level.

    Republicans, to show they are being realistic about negotiations, should come up with their own plan for extending the life of Medicare, the fiscally ailing health care program for senior citizens, and for giving the program a prescription drug benefit, Clinton's economic aides told reporters.

    Summers said the GOP plan would represent "a reversal" of the economic path Clinton took in 1993, one that would imperil the strong economy. An economist, Summers said he was particularly suspicious of a trigger in the GOP plan that would turn off the tax cut if the economy slows and the projected surplus goes away. It is in recession, he said, that government typically wants to stimulate the economy with tax cuts, even at the risk of budget deficits.

    "Now is the time to reload the fiscal cannon," he said, saying tax cuts when the economy is already strong amount to "spending your ammunition in good times."

    © 1999 The Washington Post Company

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