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Budget Negotiators Reportedly Near Deal (7/27/97)

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GOP, White House Say Budget Deal A Done Deal


WASHINGTON (AllPolitics, July 28) -- After months of wrangling, Congressional Republicans Monday night announced a long-awaited deal with the White House on balancing the budget by 2002 and cutting taxes.

"We have reached tentative agreement with the administration on the balanced budget ... and tax cut package," Senate Majority Leader Trent Lott (R.-Miss.) told a hurriedly assembled news conference.

In Las Vegas, a White House spokesman said President Clinton was happy with the deal, which set aside contentious issues including Medicare and welfare.

"The president was pleased with the information and was looking forward to a full briefing in the morning," White House spokesman Joe Lockhart told reporters in Las Vegas, where Clinton was wrapping up a three-day trip to the Western United States.


At a news conference Monday night, House Speaker Newt Gingrich (R-Ga.) hailed the deal as "a launching point" for future government and tax reform. He said Republicans this week will submit to Congress two pieces of legislation to formalize the agreement.

First would come a bill to balance the budget, and later in the week, legislation to cut taxes, the first such measure at the federal level in 16 years, Gingrich said.

During the press conference Republicans were eager to stress their belief that the agreement stemmed from their broad-based platform of change, launched in 1994, known as the "Contract for America."

"This represents the dawn of a new era," Rep. John R. Kasich (R-Ohio) said. "The Berlin wall of big government is falling. It's a huge step in transferring power from government to the people."


Child tax credit is assured

Many disputes were resolved with an everyone-wins approach. Underlining this, the five-year, $85 billion net price tag for tax cuts set by the May balanced-budget agreement seemed likely to grow by about $6 billion.

As it emerged, the accord put leaders of both parties in position to claim credit for the broadest tax cut since 1981 and, if achieved, the first federal surplus since 1969.

"This is an historic opportunity. It can be the achievement of a generation," Clinton had told the nation's governors at a Las Vegas convention earlier Monday.

But not all Democrats were pleased. Rep. David Obey of Wisconsin, ranking Democrat on the House Appropriations Committee, bolted from a meeting members of his party had with White House officials, saying "I've heard all I want to hear."

Clinton said he was looking forward to a full briefing Tuesday morning and asked aide Rahm Emanuel whether he'd gotten what he wanted for education, a children's tax cut and the children's health package, Lockhart said.

Both sides drew blood in deal

Even as both sides smelled victory, still they circled each other on some issues. The GOP acceded to Clinton's demands for a $24 billion, five-year effort to expand health-care coverage for many of the country's 10 million uninsured children.

That amount was $8 billion beyond what many Republicans preferred, but there was a catch. They were insisting that Clinton let states have leeway in deciding which services would be provided, such as mental health and dental coverage.

In addition, the GOP wanted welfare recipients taking subsidized jobs in the public and nonprofit sectors to be exempted from minimum wage and other worker protections. They argued that such requirements would make it harder to find such slots and hurt state efforts to trim welfare rolls. Clinton was resisting.

The continuing snags were clearly annoying GOP leaders, who were within reach of two of their party's biggest legislative achievements in years.

In a triumph claimed by both sides, there would be a $400-per-child tax credit in 1998, increasing to $500 the next year, for the parents of children age 16 and under. It would apply to many families who earn as little as $18,000 and owe little or no income tax, a victory for Clinton.

But it would also go to single parents making as much as $75,000 and couples making $110,000, which Republicans wanted.

The package was on track to include $35 billion or more in education tax breaks, a key Clinton demand to which lawmakers added their own ideas. Clinton said it would contain his treasured "Hope Scholarship" of $1,500 in tax credits for the first two years of college. Also included were special savings incentives for education and other reductions.

GOP claims capital gains victory

After years of trying, Republicans finally won a reduction in capital-gains tax rates, which are paid on profits from sales of land and other investments. The top rate would go from 28 to 20 percent, middle-income rates from 15 to 10 percent. For assets bought after 2001 and held at least five years, the top rate would be 18 percent, the lower rate 8 percent.

In a break for most homeowners, there would be no capital gains tax on home sales in which the profit was below $500,000 -- similar to a Clinton proposal.

The GOP surrendered, however, in its effort to "index" capital gains for inflation -- that is, to exempt from tax any increase due solely to inflation. Clinton said that would dent future federal revenues too deeply.

Republicans were winning an increase in the estate-tax exemption from its current $600,000 to $1 million over 10 years -- $1.3 million starting next year for small businesses and family farms.

And a host of new Individual Retirement Accounts for spouses, students and first-time home buyers were on the way.

To help pay for all this, bargainers were near agreement that the cigarette tax would go up a dime in 2000 and another nickel in 2002.

Most of the approximately $140 billion in five-year savings came from Medicare, whose growth would be trimmed by $115 billion, or about 12 percent. Most Medicare savings would come from reducing payments to hospitals and other health-care providers, though the current $43.80 monthly premium for coverage of doctors' bills would grow slowly.

Dropped were three Senate-approved Medicare plans that drew fire from House Republicans because they could anger elderly voters. These would have boosted premiums for higher-income recipients, gradually increased the eligibility age from 65 to 67, and charged $5 for each visit by home health workers.

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