TOPICS > Politics

Background: Budget Deal Reached

May 2, 1997 at 12:00 AM EDT


MARGARET WARNER: For political analysis of this budget deal we turn to our regular end-of-the-week political analysis team, syndicated columnist Mark Shields and Wall Street Journal columnist Paul Gigot. Mark, what brought the President and the Republicans to this deal?

MARK SHIELDS, Syndicated Columnist: Well, what brought them to it, Margaret, I think was the President’s desire to put his stamp on the Democratic Party, move it to the middle, to take away for all time at least–at least until 1998–the charge that Democrats are tax and spend people, and for the Republicans, it certainly is in their interest to do the same.

For the Republicans, I think it was even a better deal, quite frankly, because based upon the discussion Paul Solman just had with Sen. Domenici and Frank Raines, we’re reminded of the great charge the Democrats made in 1996, which really was the cornerstone of that election as described by Bob Teeter, the Republican pollster, that the Republicans want to cut Medicare by close to $300 billion in order to finance tax cuts for their wealthiest benefactors. No longer can that charge be made. The Republicans got tax cuts. They got cuts in Medicare, part of the agreement, and no more can Democrats make that charge if Bill Clinton’s position prevails.

MARGARET WARNER: How do you find it, Paul, the big difference between this and this same time two years ago?

PAUL GIGOT, Wall Street Journal: Well, I think Mark has a point when he talks about the Republican wanting the President’s signature, wanting his blessing on this, because they don’t want to repeat what happened in 1995. They–this shows–

MARGARET WARNER: Or the polls in 1996.

PAUL GIGOT: Certainly at the presidential level. I think this shows the degree of political respect the Republicans have for the President’s political skills. They think that if he didn’t like a deal, he could turn it against them. So they really did want a budget deal. The President, no question about it, wants to lose the tax and spend label. But I think the biggest difference is the U.S. economy. I mean, that 1995 deal had real cuts in spending.

This has a lot of increases in spending, from what the President wants to spend it on, substantial ones. Newt Gingrich called it the signer’s fee that the Republicans were paying to get the President’s signature. This deal was not closed as recently as yesterday, and woman by the name of June O’Neill, who runs the Congressional Budget Office, sent a letter to the negotiators today saying that their new estimates of revenue from taxes is going to be $45 billion higher this year and $225 billion higher over five years. That papers over an awful lot of differences. I mean, basically what’s happened here, the Republicans and Democrats have agreed to let the economy balance the budget.

MARGARET WARNER: So, Mark, if that’s the case, do you think there really will be a lot of disaffection among liberal Democrats, some of whom were grousing about this yesterday?

MARK SHIELDS: I think, Margaret, there is a satisfaction. It’s a little bit like the welfare reform package in the summer of 1996. The President signs it; he wins a majority of the Republicans in support of it; and there is grumbling; there is grousing; there’s dissent; there’s honest disagreement on the part of what is the basic core or the left of the Democratic Party, which has its greatest strength in the House of Representatives. Paul is absolutely right about the economy. I mean, it was remarkable how they did find that $225 billion overnight.

MARGARET WARNER: The timing’s incredible!

MARK SHIELDS: Last night they were stuck, and they said, well, let’s take another look at these numbers. But what is really remarkable is that not a single Republican supported President Clinton’s economic package in 1993. It passed only with Democratic votes, and since then, the deficit has gone down every year, and cascading tax revenues have driven to the point now we’re talking about a $70 billion deficit, which is the lowest in 20 years, unemployment the lowest in 25 years, and the economy great faster than it had in the past 10 years. So I mean, it is rather remarkable, and it’s–the times are enormously propitious.

MARGARET WARNER: Paul, how do you see the internal Democratic Party politics on this now on the Hill?

PAUL GIGOT: Well, I mean, Dick Gephardt and Al Gore obviously competing for the nomination in the year 2000, or positioning themselves to compete, I wouldn’t be a bit surprised if a lot of liberal Democrats do oppose this in part because they’re losing–they feel they might lose the Medicare issue, which they’d love to use against the Republicans, along with the AFL-CIO in 1998. And they want to take back the majority in 1998. So they’re looking for issues. They’re not looking for progress necessarily, or achievement.

MARGARET WARNER: So you mean by opposing this, they at least preserve their ability to use that?

PAUL GIGOT: To use the issue. I disagree with Mark a little bit, who seems to suggest that this is not as good a deal for Democrats as it is for Republicans. I think the President got an awful lot out of it. To get Bill Clinton’s signature the President got a lot of new spending on programs in school construction, on education, and also we don’t know yet–he limited the Republican tax cut in a $7 trillion economy to $85 billion net over five years.

We’re not talking gigantic tax cuts here. He also got a 10 year limit so that there’s no–on the size of the tax cut, so there’s not going to be a huge balloon out there, and the Medicare reforms, we don’t know yet if they’re going to take the President’s priorities or the Republicans. That has to be hashed out yet. I think the Democrats because they get the credibility of a balanced budget got an awful lot here.

MARK SHIELDS: Margaret, could I just–


MARK SHIELDS: The–today in Washington, as the piece follows, I guess, our discussion points out and celebrates the opening of the Franklin Delano Roosevelt Memorial. And I was down there–there is no quote that stands out more prominently than “The test of our progress is not whether we add more to the abundance of those who have much. It is whether we provide enough for those who have too little.”

Now, I think it’s awfully tough to look at those tax cuts when you’re talking about 1.4 percent of all Americans who die pay any inheritance tax. I mean, all the estate taxes, 98.6 percent of Americans don’t, there’s a tax–there’s a tax break that Republicans have fought for, they can deliver to–to their constituents and their constituencies. As far as the capital gains tax cut, I know you hate to argue distribution, but 85 percent of it goes to the top wealthiest 5 percent of Americans. That’s by actual Treasury numbers.

So, I mean, I really think those are tough arguments to make; that’s a Democratic platform or a Democratic program, and I think politics in the final analysis is about differences. It’s not just about the big middle. And I think the differences are going to be felt. You heard them from Jack Kemp and Steve Forbes on the Republican right. I think you’re going to hear ’em from Dick Gephardt and others on the Democratic left.

MARGARET WARNER: And how big–how loud do you think they will be from the Republican right, Paul?

PAUL GIGOT: Well, I think that if you judge by the Republican reaction at the press conference, I mean, you would think the Berlin Wall had fallen again. I mean, they were, you know, overjoyed, and there may be relief that they’re not going to have to have a veto fight. I think Phil Gramm is going to lead on this. I think right now I would say–and I think he would even admit that it’s probably not going to kill the deal.

The Republicans really do want enough of a deal. And they have things that they think they can sell, particularly in the tax cut arena. And the price of increased spending they’re willing to pay, so I think the most of the opposition here is going to come from the Democrats and from some conservatives who see that unlike 1995, this is actually going to grow parts of the government.

MARGARET WARNER: All right. Mark and Paul, we have to leave it there. Thanks.