President Clinton yesterday vetoed the Republican blueprint for a balanced budget, sending the heart of the GOP fiscal and ideological agenda into a new round of congressional negotiations and an uncertain fate.
Clinton, in an Oval Office ceremony awash with political symbolism, said, "Today I am vetoing the biggest Medicare and Medicaid cuts in history, deep cuts in education, a rollback in environmental protection and a tax increase on working families."
To emphasize his difference with Republicans over the Medicare and Medicaid programs -- a difference that has paid Clinton big political dividends this fall -- Clinton vetoed the bill with the same pen President Lyndon B. Johnson used in 1965 to sign the legislation that created the health insurance programs for the elderly and the poor and disabled.
"With this veto, the extreme Republican effort to balance the budget through wrongheaded cuts and misplaced priorities is over," Clinton said as he vetoed the measure before television cameras. "Now it's up to all of us to go back to work together to show we can balance the budget and be true to our values and our economic interests."
It has been a foregone conclusion since the long-term budget plan, called reconciliation, passed Congress last month that Clinton would veto it. The legislation is the embodiment of the GOP "Contract With America" and the agenda on which Republicans campaigned to win control of Congress last November. It lays out not only the route to a balanced budget in seven years, but a plethora of other changes in the way government does business, from welfare reform to environmental policy to tax policy.
Republican leaders were clearly miffed by what they saw as Clinton's grandstanding and gimmickry in using the LBJ pen and his tough rhetoric in attacking their budget plan.
"Instead of leading, instead of governing, he played games with the American people," House Speaker Newt Gingrich (R-Ga.) said. "The fact is the president needs to recognize that Lyndon Johnson's Great Society has failed. The people know that a Washington-based, Washington-spending, Washington bureaucracy, Washington red-tape Great Society isn't the answer."
Clinton pledged in his veto statement to lay out a full plan today on reaching the GOP goal of a balanced budget by 2002, but doing it his way and with his calculations from the Office of Management and Budget, not the Congressional Budget Office, about the economy's growth and its effect on the deficit.
To try to overcome the dispute over which economic predictions to use in calculating the long-term budget, the White House has raised the possibility of including in the budget plan a provision that would ensure that however the economy performed, the government would stay on a course that would eliminate the deficit in seven years, be it via additional spending cuts or increased revenue.
"The key is to look for some kind of enforcement mechanism that ensures we meet the targets that we lay out," White House Chief of Staff Leon E. Panetta said. "I think that makes the CBO-OMB issue moot."
Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) warned that Republicans would hold the president's new plan to the same CBO standards they used in calculating their budget. "Nobody should be fooled," he said. "The president may well submit another budget that is phony and call it balanced."
The White House also plans today to request a new continuing resolution to keep the government operating until the end of January. Another partial shutdown -- affecting about 350,000 federal workers -- would occur midnight Dec. 15 without new spending authority, unless an overall agreement is reached and the remaning six fiscal 1996 appropriations bills are signed.
In accepting a seven-year plan, as Republicans had demanded, Clinton was forced to make deeper cuts than he had proposed in a 10-year plan in June.
The president's third budget proposal this year (his first was in January) would spend about $70 billion less over seven years on discretionary domestic programs than he proposed in June but retain spending on his two major priorities, education and the environment. It keeps the $126 billion in Medicare and Medicaid savings from the earlier proposal and retains the middle-income tax cut that would cost $98 billion over seven years.
To the deeper cuts in discretionary spending, Clinton adds deeper cuts in welfare spending in his new plan -- $49 billion compared with the $38 billion in his June budget. Republicans cut $72 billion in welfare spending.
Under the president's revised Medicaid proposal, the states would be required to provide Medicaid benefits to all those in groups for which coverage is now mandatory, including welfare and Supplemental Security Income recipients and other low-income children covered by special provisions of the Medicaid law.
This retention of the federally guaranteed Medicaid entitlement counters the GOP bill, which allows states to decide eligibility.
In a major change from the current system, the Clinton proposal imposes a "per capita cap" on federal spending for Medicaid, in which federal payments would be made for each eligible person but with the amount rising each year only according to adjusted inflation increases.
The White House's new budget increases from $25 billion to $29 billion reductions in what the White House calls "corporate welfare" tax breaks for business. The plan finds an additional $28 billion in savings because the government has re-estimated the projected inflation rate to be slightly lower, which means monthly Social Security benefit payments would be less.
By contrast, the GOP plan would reduce taxes by $245 billion, cut the growth in Medicare by $270 billion and Medicaid by $163 billion, and impose double the cuts in discretionary spending.
Congressional sources also said Clinton's budget would not seek substantial savings in civil service retirement programs. Republicans had proposed $8 billion in savings by requiring federal employees and their agencies to pay more toward their pensions, but Clinton discarded that proposal, which Sen. Paul S. Sarbanes (D-Md.) said would cost the average federal worker up to $1,325 in take-home pay over the seven years.
The president, however, accepted a GOP proposal to continue a delay in cost-of-living adjustments to retirees.
Rather than allow the retiree COLA to revert to a January payment in 1997, Clinton would continue making the payments in April. The accounting maneuver would save about $2 billion over seven years, sources said.
The White House calculated all three of its budgets this year, including the new one, using economic forecasts made by OMB, while Congress relies on CBO's forecasts of how the economy will do. By using the more optimistic OMB figures, Clinton can spend $475 billion more over seven years than Republicans would and still reach, on paper at least, a balanced budget.
Panetta and a team of officials spent much of the day yesterday briefing Democrats on Clinton's new proposals and Democratic leaders said they were well-received. But unity was far from certain. The plan, drafted chiefly by administration officials, left some congressional Democrats skeptical about the size of its tax cuts and its savings in Medicare and Medicaid.
"There is still widespread sentiment here among congressional Democrats across the political spectrum that you don't start to balance the budget with a tax cut," said Rep. Martin O. Sabo (Minn.), one of the Democratic budget negotiators.
But Senate Minority Leader Thomas A. Daschle (D-S.D.) said after the meetings, "Virtually every Democrat indicated today that they could support it. In fact no Democrat indicated that he could not support it."
Also yesterday, OMB Director Alice M. Rivlin met for the first time with many of the 73 Republican House freshmen for what Rep. Jon Christensen (R-Neb.) characterized as a "very good meeting, and very bipartisan -- we feel it was very productive."
Rep. John Barden Shadegg (R-Ariz.) said there had been a profitable exchange on the deadlock over whether to use congressional or administration figures in scoring the budget, but Rep. Phil English (R-Pa.) said the two sides simply agreed on the need for "conservative numbers," without agreeing on whose numbers to use. Staff writers Stephen Barr, Guy Gugliotta and Spencer Rich contributed to this report. CAPTION: With pen used by Lyndon B. Johnson, President Clinton, behind the busts of Franklin D. Roosevelt and Harry S. Truman, vetoes Republican budget plan.