New budget deal plans to save $212 billion

WASHINGTON (AP) — Reflecting a deal between President Clinton and Congress that is nearly complete, Senate Budget Committee Chairman Pete Domenici prepared a budget-balancing plan Wednesday that envisions $212 billion in savings on the way to eliminating deficits in 2002.
Details of the package, which Domenici tentatively planned to present to his committee for votes as early as Thursday, were obtained by The Associated Press. Aides cautioned that last-minute changes might be made.
Documents show that because the bulk of the plan’s savings would not occur until its final two years, deficits for the next three years would be higher than the $67 billion expected for 1997. They would rise to $86 billion in 1998 and $90 billion in 1999, then fall back to $82 billion in 2000 and $52 billion in 2001 before the government’s annual budget is actually balanced in 2002.
The upward spike in shortfalls is certain to anger many conservatives, who have insisted all year that the year-to-year deficit should glide consistently down toward zero.
Of the $212 billion in savings, $149 billion — or 70 percent — would occur in years 2001 and 2002. Many Republicans, including Domenici himself over the years, have criticized budget plans that postpone the bulk of any savings until near the end, arguing that they may never occur.
As Domenici, R-N.M., prepared for his panel’s meeting, the House Budget Committee also planned to meet Thursday to write a similar package. GOP leaders would like to push a final version of the measure through Congress before lawmakers leave for a Memorial Day recess on May 23.
The measures the budget committees will write set binding overall figures for tax and spending, and in most years make non-binding suggestions about what specific policies and programs should look like. Final decisions about details will be made in spending and tax bills later this year.
But for this year, at least, those later bills are expected to be heavily influenced by the budget-balancing deal Clinton and congressional leaders announced May 2. White House and congressional bargainers continued working Thursday night to put finishing touches on documents that spell out details of their budget pact.
“There are some potentially contentious issues,” Domenici said of the remaining disagreements. “In my opinion, none should be show-stoppers.”
Of the papers still being completed, one was an addendum describing overall plans for spending and the process by which the president and Congress would try getting their deal enacted into law.
The other was a letter focusing on the accompanying package of tax cuts, which are to total a net of $85 billion through 2002. The package is to include GOP-sought reductions in the capital gains and estate levies, credits and deductions for higher education that Clinton wants, and tax credits for children that both parties have pursued.
Though Domenici wrote the package he planned to bring to his committee, he was hoping for support from Sen. Frank Lautenberg of New Jersey, the senior Democrat on the panel. On Tuesday, Lautenberg said he expects to be able to support the emerging deal.
From the available documents, Domenici’s plan contained no readily apparent surprises.
It would trim projected spending through 2002 by $328 billion while allowing $85 billion in net tax cuts and $31 billion for the president’s domestic initiatives, such as expanded health-care insurance for children from low-income families. That left net deficit-reduction of $212 billion.
Over the five years, the biggest chunk of savings was $115 billion from Medicare, which provides medical insurance for the elderly. The plan would provide $80 billion less for defense than would be needed to stay even with inflation.
It also has $62 billion less than needed to keep up with inflation for annually approved domestic programs, which include everything from national parks to food inspections but not benefit programs like Social Security.
Defense spending — $268 billion this year — would decline to $264 billion in 1998 year, and then rise gradually to $273 billion in 2002. Total domestic spending would be $281 billion this year and $287 billion in 1998, then rise a bit before dipping back to $289 billion in 2002.