Budget Agreement Puts Clinton in Odd Position

WASHINGTON — As a barometer of just how far President Clinton has yanked the Democratic Party away from time-honored policies, consider a plan even more striking than the landmark budget-balancing deal agreed to last week by the White House and congressional leaders: It is the budget plan Clinton took off the table at the last minute.

If the original proposal had carried the day, it would have imposed new caps on Medicaid for the poor and a legally mandated cutback in cost-of-living hikes for retirees. Those provisions were tossed out only because congressional accountants discovered an unexpected revenue windfall in the final hours of negotiations.

“I’m reminded of things like Richard Nixon’s wage and price controls,” said Stuart Rothenberg, a political analyst, recalling policies that deeply offended many in the former president’s own party. “All the indications we have are that the Democratic rank and file in Congress were totally out of the loop here.”

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A growing mutiny within the Democratic Party fizzled quickly as details of the final accord became known Friday. Party members, led by House Democratic Leader Richard A. Gephardt of Missouri, toned down their initially vitriolic criticisms.

But for many, the bipartisan agreement to balance the federal budget by 2002 remains a staggering event, setting Clinton and his own party down a path that seemed unfathomable not long ago.

If the Democratic Party has symbolized a faith in big government and an expanding safety net, the new agreement endorses a broader set of priorities for a Democratic president and a growing, if tormented, group of rank-and-file party members: tax relief for the well-to-do, restrictions on domestic spending and the overarching goal of balancing the budget, so ardently sought on Wall Street.

Beyond the budget, Clinton’s New Democrat agenda also embraces free trade deals despised by organized labor, welfare reform assailed by liberal advocacy groups and a push for volunteerism that troubles many who seek governmental solutions to social ills.

“He’s convinced people that it’s the only way to win,” declared Ruy Teixeira, a pollster with the Economic Policy Institute, a liberal think tank in Washington. Added Teixeira, who disagrees with many of Clinton’s priorities: “He’s been enormously influential.”

Like any compromise, the agenda envisioned in the five-year fiscal plan offers at least something for everyone.

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Republicans would get tax cuts they long have sought, including tax credits for families with children, relief on estate levies and a reduced tax on capital gains (although details remain undecided). The president preserved $35 billion in new tax incentives for higher education and $16 billion in health benefits for needy children, areas in which he had a special interest.

And the plan is not nearly as onerous to liberals as more conservative budget outlines that would have slashed spending and called for bigger tax cuts. For example, Head Start and Pell grants for college students would grow, along with selected other areas.

Still, large areas of domestic spending would not keep pace with inflation. Outlays for public works, research and development--while touted by the White House--would represent a smaller portion of the U.S. economy than they did under Republican George Bush.

“It helps the very top in our society, and working folks don’t make out well at all,” complained Rep. David E. Bonior of Michigan, the House Democratic whip, on CNN’s “Evans and Novak.”

The much-ballyhooed agreement was the product of weeks of closed-door sessions between White House officials and Republican leaders who control Congress, a reality that left many Democrats with the painful question: Are they still relevant?

It was last Thursday, as GOP leaders were preparing the ornate Capitol rotunda for a ceremonial announcement, that the White House team found itself the target of pent-up anger from frustrated Democrats.

As one witness recalled the scene, Rep. David R. Obey of Wisconsin tore into White House Chief of Staff Erskine Bowles and Budget Director Franklin D. Raines: “Don’t tell us we can’t take politically tough votes, because we do. . . . The administration should quit characterizing House Democrats as votes that are not gettable.”

Beyond the wounded feelings of being left out, Democrats were troubled by the substance of the emerging deal. Tax relief for inheritances and capital gains are striking departures from liberal orthodoxy; a proposed cap on Medicaid spending and a mandated cutback in cost-of-living increases further provoked Democratic lobbies.

Still, White House Press Secretary Mike McCurry seemed to signal the president might sign off on a deal with Republican leaders, even if their Democratic counterparts in the House and Senate declined to go along at first.

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That evening, a staffer on the House Ways and Means Committee informed Raines and Gene Sperling, an economic official in the White House, that the Congressional Budget Office had revised its deficit forecast and now envisioned a $225 billion windfall over the next five years.

Negotiators dropped the Medicaid cap and toned down the cost-of-living adjustment (knowing that the Bureau of Labor Statistics is going to revise the adjustment downward anyway). The rage of Democrats tempered as members considered possible changes in the plan, financed by the windfall.

“It’s very difficult to negotiate a deal with 535 people involved,” said Bowles shortly after the agreement was announced. “Could we have done a better job? Absolutely. I’ll take the blame for that myself.”

Not that the matter is settled, as attention focuses on the unlikely path of the Democratic Party and the uneasy relationship between its leader and foot soldiers on Capitol Hill. As he did on welfare reform and trade-related issues, Clinton has demonstrated his willingness to work with Republicans for goals that some of his party’s most fervent activists oppose.

By opting for compromise, Clinton made a calculated decision that balancing the budget was a more important aim than, say, injuring Republicans on the issue of Medicare savings or tax breaks that benefit the wealthy. White House strategists view this as an appropriate response to an electorate that appears exhausted by partisan squabbling.

But, noted Rothenberg, “you have to wonder if Democrats will go out on a limb for him in the future.”

Certainly, those who see Clinton moving the party into alien turf do not plan to be silent as a multitude of details related to the budget accord are worked out in Congress this year. The deal, in other words, does not signal the end of debate over the budget.

As Bonior declared Saturday: “If you don’t raise your voice, you’re not going to get anything in this business.”

Times Staff writer Janet Hook contributed to this story.