The great Battle of the Budget is over. The hawks have won. Oh, there are details to be thrashed out. And there probably will be another crisis or two before President Clinton signs a Deficit Reduction Act of 1995. But faced with overwhelming pressure from the GOP majority in Congress and a dramatic shift in public opinion, Clinton quit fighting on June 13. In his six-minute prime-time speech, he joined the balanced-budget crowd, producing a plan to eliminate the deficit in 10 years. "Finally," says American Standard CEO Emmanuel A. Kampouris, "the President is coming forward."
The framework of Clinton's plan follows the GOP's lead: He would trim growth in Medicare, Medicaid, and welfare spending and make deep cuts in most other programs. And he would cut taxes. The only major difference: The President insists on more money for education. Although specifics differ from the House and Senate blueprints, the outlines of a megadeal are falling into place. Says Senator Joseph T. Lieberman (D-Conn.): "It is now inevitable that we will have a balanced budget by a [specific] date." Adds Frank Shafroth, chief lobbyist for the National League of Cities: "The shape of the debate is fundamentally changed."
The political landscape is changed as well. In a single week, Clinton has abandoned liberal Democratic orthodoxy. For instance, he only mildly criticized Supreme Court decisions that cut deeply into federal affirmative-action and school-desegregation programs, then cut loose his party's congressional leadership on budget policy. House Democratic leaders and other members of the party's traditional wing are furious. But centrist Democrats argue that it's long past time for Clinton to adapt to a changing electorate. "We need to tell the liberal Democratic congressional wing to shut up," says consultant Brian Lunde. "Their agenda is no longer relevant."
Clinton's political calculus tells him he doesn't need liberals to pass a balanced budget. And while Republicans publicly grumble that his plan is too little, too late, they're privately cheering that he's dealing on their terms. Further, the GOP majority in Congress probably can muster 75 House Democrats and 20 Senate Democrats to back big spending cuts--as long as tax cuts are small. Says Representative Charles W. Stenholm (D-Tex.), a deficit hawk: "For the first time in my years in Congress, we have a majority of the House and Senate and the President all saying that balancing the budget is a priority."
To reach out for a deal, the President has made four key concessions:
n Health care. Medicare and Medicaid are squarely on the table. Clinton had been unwilling to change either program in his February budget plan. Now, he claims he would trim the rate of growth for both by some $153 billion over seven years. That's less than half the House or Senate savings. But outside experts say Clinton may be underestimating the extent of his cuts. The Committee for a Responsible Federal Budget figures that Clinton and the Senate are only about $6 billion a year apart in their health proposals--less than 2% of what would be spent in 2002 without changes.
-- Welfare. In another reversal and a bow to reality, Clinton now estimates that a reform plan will save $38 billion in planned government spending for the safety net. Previously, he backed welfare overhauls that required costly job and training programs.
-- Taxes. Clinton would still trim taxes for families with children and for education expenses. His $100 billion plan is far less than the House's $350 billion proposal. But both sides have plenty of room to give, especially since the Senate would not cut taxes at all until the budget is balanced.
-- A balanced-budget deadline. Ten years. Seven years. Outside the Beltway, few seem to care. "The timetable as such is not a great issue. It's important only as a signal of resolve," says Van Dorn Ooms, senior vice-president of the Committee for Economic Development, a business-oriented research group.
The fate of the budget is now up to congressional Republicans. They can still blow up an agreement by demanding a massive tax cut. But the betting is that they won't. That means a grand budget compromise is finally on the way.