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The Budget Battle

January 8, 1996 at 12:00 AM EDT


KWAME HOLMAN: What happened over this weekend was the release of a new seven-year balanced budget plan by President Clinton. That met the longstanding demand of congressional Republicans. It cleared the way for the partially shut-down government to return to work at least until a new deadline of January 26th. It also cleared the way for the next round of negotiations which began this afternoon. Here with the latest is Norman Ornstein, policy analyst with the American Enterprise Institute. Thanks for coming in through the snow, Norm.

NORMAN ORNSTEIN, American Enterprise Institute: Sure, Kwame.

KWAME HOLMAN: What is in the President’s new seven-year balanced budget plan?

MR. ORNSTEIN: Well, of course, this is the first plan that he has submitted that balances the budget using the numbers, the economic projections of the Congressional Budget Office, and basically, it includes some changes from his original budgets. There are still gaps with the Republicans on Medicare. He proposes $102 billion of savings over seven years. The Republicans’ budget that they’d submitted in the past, in November, is about double that. It’s about 50 some billion dollars, $52 billion in Medicaid. The Republican budget is still very substantially more than that at about $117 billion. Some real differences, not as much cutback in domestic spending, a little bit more in defense and tax cuts that total $87 billion, with a kind of a trigger. If the economy does as well as the administration thinks, then we’ll have more tax cuts a little further down the road. The gaps remain in Medicare and Medicaid, and welfare reform, and on the tax side, and as well as the domestic spending, and so we still have some substantial direction to go here before we can get a budget deal. But it was enough to get Republicans to open up the government, although obviously, they were looking for an excuse to do so, because they lost the public relations battle on that one.

KWAME HOLMAN: They were getting a lot of pressure from constituents.

MR. ORNSTEIN: And what happened over the weekend, Kwame, was first, we had an agreement on Friday, of course, to start paying federal employees. The stories were almost on every local television station and news reports of people who just were in severe difficulty had gotten through, but that wouldn’t have given them the tools to do their work or provided resources for all of the contract employees who depend on the federal government, numbering in the millions. So once the President moved this extra little distance, we had the ability to reopen the government fully, taking care of the outside contractors, the tools to get the job done. Now they’ve set a deadline of the 26th of January, with the hope and expectation that we’ll get a budget agreement by then.

KWAME HOLMAN: The President’s budget with those numbers you just talked about is very similar to the Senate Democrats’ budget, with the exception of the tax cut. They have–the Republicans in Congress have been asking him for a month to submit a budget, any budget. Why do you think he took so long to do so?

MR. ORNSTEIN: I think what we had here was, in part, we’ve got a lot of undercurrents here, Kwame. In fact, there are so many undercurrents in this budget debate we could get seasick on them. One of them was a question of what negotiating position would occur that would leave one side a little bit superior to the other, and the President being forced to submit a budget, something the Republicans wanted that they thought would enable them to declare a partial victory. They believed he couldn’t submit a balanced budget that would meet all of his objectives and still balance in seven years, using the CBO numbers without causing enormous pain to Democratic constituencies. It took ’em a while to come around and decide that it reached a point in part because Republicans had lost the rhetorical war on reopening the government and use the figures that the Senate Democrats, Tom Daschle, the Minority Leader of the Senate basically had come up with, that, in fact, were able to come into balance but not do great injustice to some of the Democrats’ objectives.

KWAME HOLMAN: So those gaps exist on Medicare, Medicaid, and some of the policy questions as well. There’s a new deadline of January 26th. Are we looking at another potential government shutdown come the new deadline?

MR. ORNSTEIN: Well, you know, we’re looking at two crunch points ahead. Certainly, the 26th is one. They have a little bit of leeway here. If they can’t make great progress in the next few days, then we’ll be looking at possibly another one of these rounds of shutdowns. We also know that while we have delayed the problem of the debt, the debt limit having already been basically reached a couple of weeks ago, Secretary of the Treasury Bob Rubin has used extraordinary measures that are there in the law but that go beyond what has been done before to keep the United States from having to declare itself in default for the first time in 200 years, but that can only go on for another couple of weeks, possibly into early February, so there’s additional pressure here now, and obviously both the White House, congressional Republicans trying to figure out how they can reach a deal and declare victory, whether it’s in their political interest to reach a deal, and congressional Democrats dividing into different groups and some other coalitions that are developing here as well that could be interesting.

KWAME HOLMAN: New coalitions that could pass a budget favoring one side or the other in ways we haven’t seen before. You mentioned the possibility of no deal at all. People have been reporting on that possibility. How would such a scenario work out?

MR. ORNSTEIN: Well, we’re going to know something more, I think, within the next couple of days. We’ve had now the Republicans today submit a new set of numbers, themselves, using figures that are very close to the budget that was submitted originally by the more conservative Democrats, the so-called coalition or blue dog Democrats, many of whom we’ve seen on the show in the last few days. Medicare numbers that are somewhere between $163 billion in savings, about $85 billion in Medicaid, those are pretty close to where you could have a reasonable compromise. We’ve had the White House, though, saying $102 billion for Medicare, that’s it, that’s our final offer, the Republicans now saying this is our final offer. If we don’t get some movement there, it could break down, and now this group of the coalition becomes a more interesting force, because we also have congressional Republican leaders saying if the President won’t go along, we’ll try and form a separate deal with them. Some of it obviously is what happens in a negotiation where you say this is my final offer, and then you move to make a deal. But if they don’t get much closer in the next couple of days, it’s going to be harder for them to basically bridge the gaps that they have in these numbers.

KWAME HOLMAN: We’ll keep watching. Thank you very much, Norm Ornstein. Jim.

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