WORLD

SELLING SACRIFICE

BILL CLINTON HITS THE ROAD TO ASK AMERICANS TO SHARE THE BURDEN OF TAX HIKES

HILARY MACKENZINE March 1 1993
WORLD

SELLING SACRIFICE

BILL CLINTON HITS THE ROAD TO ASK AMERICANS TO SHARE THE BURDEN OF TAX HIKES

HILARY MACKENZINE March 1 1993

SELLING SACRIFICE

WORLD

BILL CLINTON HITS THE ROAD TO ASK AMERICANS TO SHARE THE BURDEN OF TAX HIKES

To rapturous applause and standing ovations, President Bill Clinton unveiled his eagerly awaited economic blueprint, titled “A New Direction,” before a joint session of Congress last week. “It has been too long—at least three decades— since a president has challenged Americans to join him on our great national journey,” Clinton said, invoking former president John F. Kennedy’s call to national service in 1961, “not merely to consume the bounty of today but to invest for a much greater one tomorrow.” And, in his hour-long speech, punctuated by 75 rounds of applause, Clinton asked Americans to embrace tough measures designed to revitalize the flagging U.S. economy and put the country’s fiscal house in order. Pledging in turn that the burden of sacrifice would be fairly shared, the President declared: “The test of our program cannot simply be: What is in it for me? It has to be: What is in it for us?”

On that stirring note, Clinton mobilized the fledgling Democratic administration to sell his tough package, calculated at $314 billion in tax increases and $316 billion in spending cuts. The ambitious plan, he argued, would not only reduce the $397-billion budget deficit but also stimulate much-needed long-term investment. As well, Clinton promised, it would put people back to work by creating half a million jobs this year.

But as the President heralded his program as a new beginning for America, his Republican opponents lambasted it as nothing more than a repeat of tax-and-spend liberal Democratic policies from the past. And in Ottawa, where the federal government faces a stubborn budget

deficit currently standing at more than $34 billion, politicians of all stripes studied Clinton’s initiative for clues about how to deal with Canada’s economic problems in an election season.

Finance Minister Don Mazankowski claimed that Clinton’s attack on the deficit was similar to the Conservative government’s economic agenda—with one major divergence. ‘'He is on the right track,” said Mazankowski. “The only difference is that he thinks he can tax his way out of this particular situation.” Added the finance minister: “We’ve got to try to reduce government spending further still.” Liberal trade critic Roy MacLaren, who chairs his party’s caucus committee on economic policy, also questioned whether tax increases are realistic in the Canadian context. “The combined provincial and federal income taxes in Canada today are higher in most instances than they are in the United States,” he said. “Canada has moved to tax the Canadian people to the utmost—I doubt that there’s very much room left there.”

As for the New Democrats, leader Audrey McLaughlin chose last week to unveil her party’s own economic blueprint (page 40). The plan includes scrapping the GST and free trade, creating 500,000 jobs over five years and spending $1.5 billion annually over the same period on projects such as sewers, roads and telecommunication networks, while raising both corporate taxes and income taxes on those who make more than $100,000 a year. “The government says, ‘The fundamentals are in place, we just have to wait and see if it all works out,’ ” said McLaughlin. “We are saying: ‘We need new fundamentals.’ ”

McLaughlin noted that Clinton’s message was also one of change. But the U.S. President will face a tough battle to get congressional approval for an economic package that includes politically sensitive tax increases such as a

proposed energy tax. So far, his appeal for sacrifice seems to be resonating with Americans. In an ABC News poll, 74 per cent of those surveyed approved of the President’s tough measures, while only 18 per cent disapproved. And Clinton, who had briefed presidential candidate Ross Perot in advance, won provisional support from the Dallas billionaire, whose campaign promises of fiscal responsibility won him 19 per cent of the popular vote in the November election. “It was a good speech,” Perot said after Clinton’s address to Congress. But, he added: “The devil is always in the details.” While supporters of the Texan said that Clinton’s plan was similar to Perot’s, they expressed concerns that its spending cuts may not be deep enough. “My fear is that they’re going to keep raising taxes without cutting anything back,” said Peggy Beil of Richardson, Tex. “I really want to see some meaty cuts.” And Perot representative Sharon Holman said that if Clinton’s spending cuts prove sufficient, “we want to work with [the President] to get this through Congress—we can provide the support he needs.”

Clinton was leaving nothing to chance as he attempted to show that his package was balanced. Armed with blue-and-white budget booklets, color flip charts and pie graphs, he and key members of his administration fanned out across the country to deliver the details to the American people. The brunt of the tax hikes, they explained, would be borne by business and by wealthy Americans earning more

than $147,000 a year (page 30). Still, a new energy tax would hit any family earning at least $38,000—including the middle class, whose taxes Clinton promised to cut during the campaign. Only under that income level would Americans be eligible for a tax credit to recoup the average $13-a-month energy tax on electricity, gasoline and home-heating bills.

In addition to the tax increases, Clinton announced that he would slash military expenditures by $143 billion over four years and trim 150 civil projects ranging from the $38-billion space station to agricultural subsidies for honey producers. And responding to populist sentiment, Clinton pledged to freeze all federal government salaries and restrict the payments doctors and hospitals receive under Medicare. But he stumbled when the White House had to downsize its projected budget deficit reduction to $416 billion from $632 billion, after the President failed to take into account $216 billion in new spending programs.

Clinton also announced a $38-billion program of business tax credits and direct spending to rebuild the nation’s roads, bridges, sewers and communications systems and provide summer jobs for youth—particularly in strifetorn inner cities. The goal, he said, was to

create 500,000 jobs by the end of 1994—a down payment on the eight million additional jobs he promised to add by 1997 with a $216billion plan for long-term spending on such projects as high-tech computers, a national service program and research money for AIDS and women’s health initiatives.

Many Americans said that they were prepared to accept some tax increases as part of a balanced package. “I am willing to sacrifice,” said Barbara Shaw, a 46-year-old public affairs officer supervising the binding of Clinton’s 145page economic booklets at the Government Printing Office in Washington, “if I see that the money is going to pay down the deficit.” And after Clinton’s speech, congressional switchboards that earlier in the week had been deluged with negative calls from angry citizens concerned about their welfare and social security payments began to receive messages of cautious support. “People recognize the medicine will be hard to swallow,” said Democratic Senator Wendell Ford of Kentucky. “But the package as a whole prescribes the necessary tonic to bring prosperity back to the country.”

The ambitious recovery plan, Clinton declared, was a sharp departure from supplyside Reaganomics that oversaw the country’s massive military buildup, tax breaks for the wealthy and deep cuts in government spending. “We will put in place one of the biggest budget deficit reductions and the biggest change of federal priorities in our history at the same time,” the President told the standing-roomonly crowd in the House Chamber, where Franklin D. Roosevelt preached the New Deal and John F. Kennedy inaugurated the New Frontier. Thomas Mann of the Brookings Institution, a nonpartisan Washington thinktank, called Clinton’s plan “progressive and quintessential^ Democratic,” adding that the

President had faithfully listened to traditional Democrats’ concerns about fairness, while responding to the need to control the deficit and curb American’s self-indulgent spending habits in favor of investment. Declared Mann: “Message: this President will try and stop the country drifting.”

Despite Clinton’s appeal for change, even Democrats warned that the President’s program may face a bumpy ride. Representative Robert Matsui of California, for one, a Democratic member of the powerful House ways

THINKING ABOUT TOMORROW

Presenting a four-point economic plan to Congress, President Bill Clinton tried to achieve what he described as “both increased investment and deficit reduction.” A combination of immediate tax cuts and spending increases totalling $38 billion are designed to create at least 500,000 new jobs over the next year. But long-term spending cuts and tax increases are aimed at trimming $416 billion from the federal budget deficit by 1996.

SPENDING INCREASES

t$19 billion in new spending on such areas as highway construction, summer jobs, unemployment benefits, job training, education, environmental initiatives and childhood vaccination

TAX BREAKS

$19 billion in tax credits for investment in small business or for the purchase by businesses of new equipment

SPENDING CUTS

« defence cuts totalling 7 nearly $143 billion

elimination of 100,000 federal jobs through attrition over four years

streamlining federal agencies and cutting their budgets to make them more efficient

salary freeze for federal employees

still-undetermined limits on federal health-care spending

TAX INCREASES

a boost in the top income tax rate to 36 per cent from 31 per cent for individuals with a taxable income over $147,000 and for couples who earn more than $179,000 an additional 10-per-cent surtax on familiy incomes of more than $320,000

an increase in the top corporate tax rate to 36 per cent from 34 per cent

an across-the-board tax on all forms of fuel—including gasoline—calculated on the basis of energy efficiency taxation of 85 per cent—up from 50 per cent—of social security benefits of wealthier pensioners

and means committee that scrutinizes all tax legislation, acknowledged that Clinton will need almost unanimous support from the Democratic majority in Congress because he cannot count on one Republican vote. “It is going to be a tough, tough sell,” he said. Anticipating a firestorm of criticism from special-interest groups that range from the wellorganized elderly to powerful big business, Matsui added: “Everyone is going to be hit by the package. Everyone becomes a special interest. And, we need the courage to say no to everyone.”

Predictably, the plan drew howls of derision from Republicans. “Did I hear that right?” former president Ronald Reagan asked in a scathing opinion piece in The New York Times. “I’m afraid so,” the staunch conservative wrote, predicting that a tax-heavy package would stifle economic recovery. “Do they really believe that those who have worked hard and been successful should somehow be punished for it?” Texas Senator Phil Gramm denounced Clinton’s program as “cradle-to-grave government paid for by cradle-to-grave taxes.”

But Washington political strategist Ed Rollins, who briefly worked on the Perot campaign, said Clinton had masterfully forced Republicans to come to the defence of the wealthy while the President solidified his support among the beleaguered middle class and Perot voters. “You’ve got a very smart team in there today, and I think we’ve got a battle like we’ve never had before,” Rollins said.

Both Republicans and Democrats agreed that the battle lines have been drawn and that the war will be fought first in 4he nation’s living rooms. In order to get his austerity package passed, analysts said, Clinton must gain enough popular support to pressure Congress into supporting tax increases. Said Washington-based economist Paula Stern: “Clinton has got to build the backbone and ensure that it’s erect in individual members of Congress by appealing to the grassroots.” Added the Brookings Institution’s Mann: “Clinton does not have to go over the heads of Congress but he has to give them political cover.”

By week’s end, it was “candidate Clinton” who hit the road with his message, calling on people in St. Louis, Mo., Chillicothe, Ohio, and Hyde Park, N.Y., to back their elected politicians in making the difficult decision to support the package. At each stop, he cautioned, as he had in his speech before Congress: “Unless we change, we will condemn our children—and our children’s children—to a lesser life and a diminished destiny.” Clinton is doing more than relying on taxing and spending. He is counting on the people to pressure Congress to support his first major initiative.

HILARY MACKENZINE

CHRIS WOOD

GLEN ALLEN