Washington: Deficit Chickens

Just before Thanksgiving, Bill Clinton established once and for all that he is, in fact, a traditional, tax-and-spend Democrat and that his oft-stated concerns about the budget deficit are simply a cover for raising taxes. In a frantic, pre-holiday lobbying campaign, he led a crusade to defeat a modest deficit-reduction plan offered by Reps. Tim Penny (D-Minn.) and John Kasich (R-Ohio). The Penny-Kasich plan, which would have cut spending by a mere 1 percent over the next five years, made the big spenders apoplectic. Penny-Kasich didn't pass, but the frenzy to defeat it clearly demonstrates that the Washington establishment has no intention of loosening its grip on Americans' wallets.

Clinton has the same view of deficits as Ronald Reagan: Big deficits can preclude spending on new programs. While Reagan used deficits to keep big spenders at bay, Clinton finds deficits an impediment to his ambitious agenda. At a speech in Santa Monica, California, last February, Clinton warned that, unless the deficit is reduced, entitlement spending and interest on the national debt would leave him only "three or four cents on the dollar" for health-care reform, national service, "investment," and so on. The spending limits in Penny-Kasich would have thwarted Clinton's plans.

Back in August, when he was trying to get his budget passed, Clinton made a deal with moderate and conservative Democrats who argued the plan relied too much on higher taxes or didn't cut spending early and often enough: Vote for the budget, and the moderates--including Penny--could propose a new set of spending cuts in the fall. (Clinton made a similar agreement with Sen. Bob Kerrey of Nebraska.) They relented. Clinton's budget passed by one vote in the House and by Vice President Al Gore's tie-breaker in the Senate.

Democratic leaders thought they were off the hook. They obviously didn't understand how painful the vote was to moderate Democrats. Citing his frustration with the recalcitrance of the pro-spending groups in Washington, the 42-year-old Penny announced that he would resign from the House at the end of his term.

And the following weekend's talk shows prominently featured freshman Rep. Marjorie Margolies-Mezvinsky (D-Pa.), who cast the decisive vote. The Almanac of American Politics 1994 calls Margolies-Mezvinsky's district a "quintessentially Republican seat." Margolies-Mezvinsky had run for the open seat in 1992 as both a liberal and a deficit hawk, winning by only 1,300 votes. She had announced her opposition to the Clinton budget a couple of hours before the vote.

Margolies-Mezvinsky had to be bullied into changing her position. The televised images of a harried, almost-tearful member of Congress explaining her switch made Margolies-Mezvinsky an instant, if unintentional, celebrity.

These bullying tactics also provided an opportunity for the moderates to demand that Clinton deliver on his promise. Penny got Clinton and House Speaker Tom Foley to agree to a vote on spending cuts before the House adjourned in November. When Clinton offered his "rescission" package, House members could propose amendments that would be voted on individually, without any revisions, at that time.

The White House and Democratic leaders obviously underestimated how serious reform-minded Democrats were about extra cuts. Instead of squabbling among themselves about little cuts, Penny and the moderates decided to put together a single package of substantial cuts. Penny then met with Kasich, who had unsuccessfully offered his own detailed alternative to Clinton's plan, which would have achieved similar deficit cuts with less spending and fewer taxes. (See "The Energizer," August/September.)

Penny and Kasich formed a 30-member task force composed of 19 Democrats and 11 Republicans to draft a detailed package of additional cuts. Along with such congressional veterans as Alex McMillan (R-N.C), Robert Walker (R-Pa.), Charles Stenholm (D-Tex.), and Dave McCurdy (D-Okla.), the task force included 14 freshmen--among them, Marjorie Margolies-Mezvinsky.

On October 27, the task force proposed specific cuts that would reduce spending by $103 billion over five years. The plan had a big hook: Every dollar cut from spending would also reduce the spending caps enacted in Clinton's budget. In other words, Congress couldn't take money cut from these programs and spend it somewhere else without busting Clinton's budget deal.

The initial package included more than 90 specific program cuts. Twenty-eight percent of the savings resulted from eliminating or privatizing programs, the rest from program reforms. Thirty-four billion dollars came from means-testing Medicare. The plan increased the physicians' fees and premiums paid by people who earn more than $75,000 a year; it instituted 20-percent co-payments for home health care and clinical lab services from people with incomes more than 150 percent above the poverty line.

The plan cut retirement benefits for government employees, raising the age of civilian retirement from 55 to 65 and deferring cost-of-living adjustments for military retirees younger than 62. It cut $5 billion in payments to NATO and other collective-security organizations; de-funded weapons programs for a grenade launcher, a cargo plane, and a helicopter; and cut foreign aid by $5 billion. It eliminated the Interstate Commerce Commission and combined the Departments of Commerce, Energy, and Environment, NASA, and the National Science Foundation into a single cabinet-level agency, the Department of Science.

The plan also locked in proposals made by Clinton's National Performance Review: Cut 252,000 federal jobs; eliminate Department of Agriculture and Army Corps of Engineers field offices; and raise the threshold for the Davis-Bacon Act from $2,000 to $100,000, so that its prevailing-wage provisions apply to fewer federal contracts. Kerrey and Sen. Hank Brown (R-Colo.) offered a similar package of cuts totaling $109 billion that they will propose this spring.

With few exceptions, the Penny-Kasich plan barely registered on Beltway radar screens until the November 19 vote approached. The Concord Coalition, the deficit-fighting group started by former Sens. Paul Tsongas and Warren Rudman, immediately endorsed Penny-Kasich. Spokesman Fred Bucher says the coalition urged its 100,000 members to telephone and write members of Congress and to call radio talk shows to drum up support for the plan.

Clinton was so busy getting the North American Free Trade Agreement passed that he ignored the spending proposals. A week before the scheduled vote, the White House and House Democratic leaders started paying attention. They panicked. Budget Director Leon Panetta said Penny-Kasich would jeopardize the Clinton presidency; the defense cuts "would be a very, very severe blow" to military force structure and morale. Deputy Budget Director Alice Rivlin warned that the $8 billion in cuts scheduled to take effect in 1994 could throw the economy into a recession. (Of course, the $1.9 billion in extra cuts Clinton proposed wouldn't.) Clinton himself said Penny-Kasich "would remove the possibility of health-care reform."