this week's stories

The Budget Deal: A Conspiracy Of Celebration

Censor's Sensibility

When Diplomacy Becomes Obscene

The Budget Deal: The View From K Street

The Press Muzzles Itself

The Tax Bill: Money In Motion

The Tax Bill: What It Means To You

Go, Hogs! Chop Soooie!


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The Budget Deal: A Conspiracy Of Celebration

Yep, Congress and Clinton finally balanced the budget. But in their haste to hand out goodies, they missed a chance to defuse some time bombs

By Nancy Gibbs/TIME

Time cover

WASHINGTON (TIME, Aug. 11) -- Nothing makes politicians happier than making people happy, especially when those politicians can say they've made history at the same time. And so last week on a perfect day, they all came together bearing gifts: interns whooped and staff members grinned on the White House lawn as the President basked in the ultimate triumph of his long march to the center, which almost none of the cheering Democrats behind him had backed. Down the street on the Capitol steps, Republican lawmakers and a flock of Boy Scouts with balloons gathered around the nearly deposed Newt Gingrich and the newly grandiloquent Trent Lott, who declared, "Today we celebrate the beginning of a new era of freedom." And his was about the most modest toast of the day.

Such days are the blessings of a booming economy. In the year when the stock market landed on Mars and inflation became a fugitive, Washington embraced a new politics of abundance, enacting a five-year budget deal that gives away something to just about everyone. Republicans finally realized their cherished goal of cutting capital-gains and estate taxes; in return Democrats got to spend more on education, more on cities, more on welfare, more on children's health, just more in general. The deal passed last week was historic because it balanced the budget for the first time in nearly 30 years, made the biggest tax cut in 16 years and managed both without bloodshed. It was left to sober economists to swat away all that confetti and note that the economy was going to do a lot of that anyway and that the big, important issues--like fixing Social Security and Medicare--had all been quietly tabled.

And so what was a triumph of politics was also a failure of will, not because the politicians neglected to do what they had promised but because in a rare moment in history when so much more was possible, Bill Clinton and Gingrich and Lott did only what they had promised to do. In private, the architects admitted as much. On the telephone Wednesday afternoon Lott put it this way: "We didn't do nearly enough in spending restraint in my opinion. But to get what we wanted on the tax-relief side, we made some concessions." A White House official was even blunter: "They took care of their contributors. We took care of our voters."

Of course, the truly historic thing about the deal was how both parties were so spooked by their own pasts. This budget, which shrinks the deficit by $182 billion over five years, pales against the deals of 1990 and 1993, which shrank the deficit more than twice as much and laid the groundwork for the recovery that made this hootenanny possible. Those showdowns were bloody, fratricidal affairs that left many in both parties wondering why they bothered in the first place. In 1990 George Bush broke a campaign promise and raised taxes; he never regained the public's trust. In 1993 the Democrats essentially took the same approach and a year later lost control of both houses of Congress.

But if sacrifice was out of order this year, so too was any sense of urgency. Back in May, at the moment both parties were poised to suck it in and embrace a reduction in cost-of-living increases for Social Security recipients, along came the statisticians with a check for $225 billion--courtesy of an economy then growing at 6%. It was at that point that the budget debate slid from discipline into gratitude. There was suddenly enough money for everyone.

Still, the deal nearly broke down at several turns as the Clinton Administration pushed for more spending and the Republicans tried for deeper tax cuts. As the two parties inched forward, each beat back threats from its own ranks. The Administration endured shouting matches with congressional Democrats until the very end. The Republicans had an even tougher go of it, almost decapitating Gingrich when he suggested they postpone tax cuts and, more recently, when he seemed too quick to compromise with Clinton.

White House officials talked this week of deliverance: delivering tuition credits for suburban voters, delivering tax credits for middle-class families with children and health care for the kids of the working poor. The balanced-budget bill, they argued, delivered them from 25 years of wandering in the tax-and-spend wilderness. "These things are aimed right at the voters you need to build a majority in a national election," said a senior aide. "That's why we did it." Almost as an afterthought, he added, "I mean, we also did it because it was the right thing to do."

Either way, the payoff has been unmistakable. In a TIME/CNN poll last week, 41% of those surveyed, a thin plurality, credited the Republicans with passing the budget deal and giving it a conservative tilt. But the poll shows Americans awarding the Democrats a distinct edge over the G.O.P. in handling the nation's problems and an impressive 60% approving of the President's handling of his job--nearly an all-time high.

So, if Democrats get most of the credit for the most popular Republican ideas, why did Gingrich seem to be the happiest man in Washington last week? Gingrich was trying to find comfort in the intellectual victory, and held not one but two self-congratulatory parties to celebrate. (At the second party he passed out pens and children donned T shirts that read G.O.P. 1997 TAX CUTS--THE REAGAN LEGACY.) After months and months of either avoiding reporters or lambasting them, the Speaker got on the phone one night and poured forth his good cheer. "Four years ago," he declared, "we were raising taxes and moving toward government-run health care. Now we're balancing the budget and cutting taxes. It's fair to say if you were to look at our speeches in 1994 and what passed today and will pass tomorrow, you'd have to say the world is a lot closer to what we campaigned on than to what anybody else did."

Both sides are aware of the charge of cowardice, the accusation that they had missed the chance to use this sweet, prosperous moment to make some hard changes in entitlements before the baby boomers retire and melt down the whole system. The White House recognizes the validity of this complaint on some philosophical level, but the charge has no connection with their reality. "Ah, you guys won't be happy until we have surgery without anesthesia," says a cheerily irate Rahm Emanuel, senior adviser to the President. Burned by health-care reform, Clinton has concluded that big change and bold reforms may be popular with editorial writers but are toxic with voters. Better to move at the margins, insure an extra 5 million children, gradually herd more seniors into managed-care programs, prune the rough edges on last year's welfare reform, change the system drop by drop and let history judge the results.

The Senate at least took a swipe at the encrusted special interests, voting in June to raise the Medicare eligibility age to 67, hike premiums for wealthier retirees and require nursing-home residents to make a small co-payment. But the House didn't want to go along. "We did a courageous thing," says Lott. As the negotiations entered their final stage, Lott recalls, the response from House members "went from a courteous blank stare to an outright NO! ... I'm ashamed of the House, and I'm ashamed of the President," says Lott, faulting the President for refusing to take on the senior lobby even at a moment of record approval ratings and with no need to ever face them again at the polls.

So the Senate Medicare reforms vanished, and in their place came $115 billion in cuts to hospitals that even the medical industry knew were largely inevitable. Elsewhere, the budgeteers fell back on easy targets: raising taxes on cigarettes, boosting fees on airline tickets and selling off pieces of the public trust, like the broadcast spectrum, to raise some of the money needed to help bring the budget into balance.

The hard-liners aren't about to let either side off the hook. "This is a budget with no sacrifice, no hard choices and no change in spending patterns or public policies," said Texas G.O.P. Senator Phil Gramm. "It's very good politics. But we're betting an awful lot on the strength of the economy, and we haven't done anything fundamentally to restrain spending." Even worse, to Gramm's mind, is the inclusion of new programs--like the $24 billion set aside for states to provide health care for children who have no insurance--that are being sold as fiscally prudent. "The new spending programs are like baby hippopotami now," Gramm explains, relishing every syllable. "They're small and they're cute. But in five years each of those baby hippopotami will be a big, ol' ugly hippopotamus."

Sensitive about unfinished business, Clinton last week began moving his rhetorical chips behind a new commission created by the deal to recommend long-overdue changes in the Medicare system--the Washington equivalent of hitting the snooze bar. The commission, by law, must report its recommendations to Congress in two years, safely after the midterm elections but just around the time both parties start staging for the 2000 campaign. Which is why hardly anyone thinks either party will take the entitlement challenge any more seriously then than it does now. By Friday, White House aides let it be known that the President had asked his top economics adviser, Gene Sperling, to report to him on ways to solve the Social Security dilemma--before Clinton leaves for vacation on Aug. 18. The President "has a chance to build a consequential legacy," says a White House adviser. "He has locked up something important and attainable. Now he has to turn his attention to bigger things."

And certainly few things are bigger than this. By 2030, notes former Senator Warren Rudman of the Concord Coalition, a bipartisan group founded to promote a balanced budget, the number of retirees will be growing at more than twice the rate of workers needed to support them. Tax payments from workers will fall well short of the dollars necessary to provide seniors with health-care and pension benefits. The Congressional Budget Office does not even bother to calculate that much red ink; instead, in charts projecting the deficit in 2030, it relies on the notation NC, meaning "not calculable." A CBO official explains, "That's shorthand for fiscal meltdown." Says Rudman: "The numbers are relentless. The curve line goes straight up after 2002. These are decisions that will just become more difficult to make."

--Reported by James Carney, John F. Dickerson and J.F.O. McAllister/Washington

The Taxpayers Weigh In

Who was more responsible for getting the budget agreement completed--Bill Clinton or the Republicans in Congress?


Have Clinton and the Republicans proposed these tax cuts because they are good for the country or to win political advantage?

Good for the Country
Political Advantage

Is it likely or unlikely that this agreement will result in a balanced budget?


From a telephone poll of 814 adult Americans taken for TIME/CNN on July 30-31 by Yankelovich Partners Inc. Sampling is +/- 3.4%. "Not sures" omitted.

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