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Landmark budget deal nears passage

By David EspoAssociated Press Published: July 29, 1997 12:00 AM

"We gave ground. The administration gave ground. And we found common ground," a happy Senate Majority Leader Trent Lott said Monday night as the two sides announced a tentative accord.

"We couldn't be more pleased with the outcome," said White House Chief of Staff Erskine Bowles, the administration's point man during a secretive final few days of bargaining. President Clinton, who was out of town when the agreement was announced, was flying back to Washington overnight and expected to bestow his blessing today.

The tax breaks would principally benefit families with children, students and investors _ although there would be significant new opportunities for Individual Retirement Accounts.

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Tax and spending cuts aside, the agreement also establishes a new program of coverage for children currently without health care. Tobacco taxes would rise to help finance the program.

All sides described the agreement as tentative, subject to the drafting of official legislation. At the same time, Republicans expressed confidence the package _ broken up into two huge bills _ would be on the floor of the House and Senate and passed by the GOP-controlled Congress by Friday at the latest.

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"I think it will sell itself," House Speaker Newt Gingrich predicted.

The agreement stood in contrast to more than two years of political combat between the White House and Republican congressional leaders that led to twin government shutdowns two winters ago.

In the end, both Clinton and the GOP majorities were returned to office in last fall's election. Back in power, they settled on a course of compromise that led to the outlines of a grand budget deal in late spring.

Translating that into the detailed tax and spending bills took several additional weeks _ and dozens of trade-offs.

Republicans, for example, prevailed on their demand that the new health program bar funding for abortion for eligible teen-agers. Democrats held sway on their demand that welfare-to-work women receive minimum wage as well as protection in federal law against discrimination and sexual harassment.

While many details were unavailable Monday night, aides provided these broad outlines:

The tax cut would bestow breaks worth about $140 billion over five years to families with children, to students and _ in a major triumph for the GOP _ to investors regardless of their personal wealth or income.

The per-child tax credit would be worth $500, as Republicans originally proposed in their 1994 "Contract With America" campaign manifesto, and would be available to many lower-income working families, as Clinton demanded. The capital gains rate would fall from a maximum of 28 percent to 20 percent.

There would be expanded IRAs, as Republicans had sought, as well as the tax breaks for students that Clinton had demanded.

Spending would be slowed by approximately $140 billion over five years, enough to balance the government's books for the first time since 1969. While Medicare would account for the largest share, additional savings also would come from Medicaid, student loans and a variety of other benefit programs. Social Security would remain untouched.

Tens of billions of dollars in additional savings would come from the annual spending bills that Congress will vote on later in the year.

The solvency of Medicare would be extended through the year 2007. Senior citizens would be able to choose from a variety of coverage plans, including not only the current fee-for-service method, but also managed care options. Republicans won agreement for medical savings accounts for about 350,000 seniors nationwide.

Senate-passed provisions to increase the eligibility age to 67, require wealthy recipients to pay higher premiums, and impose a $5 co-pay for home health care services were dropped.

Several million children who now lack health insurance would receive coverage under a new program, to be financed in part through a higher tax on tobacco products. Securing this agreement had been one of Clinton's primary objectives.

With many details still to be filled in, many congressional Democrats were reluctant to embrace the plan, and aides said House Democratic leader Dick Gephardt was likely to oppose at least the tax cuts.

"Instead of hearing all the hyperbole, I want to see what it actually does," said Rep. David Obey, D-Wis., a frequent critic of the Republicans and occasional critic of the president. "I'd like to know what the details are."

Republicans were far less reticent.

"This is a huge step in beginning to transfer power, money and influence from (Washington) to the people," said Rep. John Kasich, R-Ohio, chairman of the House Budget Committee,

Added House Majority Leader Dick Armey, "It is in fact a reflection of the direction we set when we wrote the 'Contract With America."'

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