Clinton's Fighting Words

The President's policy initiatives send a message: Don't count me out

Early on the morning of his State of the Union address, Bill Clinton met with his Chief of Staff and a small group of aides. Overnight, Clinton told them, he had decided to add two more goodies to his speech. He would come out in support of a higher minimum wage and an extension of the family leave law to include smaller businesses. This State of the Union would be a defining moment. Clinton had to show Capitol Hill, the media, Independent Counsel Kenneth W. Starr--and the public--that he was still a force to be reckoned with and wasn't going down without a fight.

It's not likely that those last-minute additions made much difference, but by the time the speech was over, Clinton had fired up his comeback campaign. In the 74-minute address, he laid out 49 new initiatives. They ranged from a call for fixing Social Security to a patient bill of rights for Americans in managed-care plans to a trade pact with African nations. The result: Clinton's job-approval ratings soared on Jan. 28 to a record 70%. Bitter Republican foes had to admit that a bravura performance went far to redeem him politically.

Not that the job is finished. Even as the President is clawing his way back to respectability, his lawyers are trying to derail Starr's investigation, which is digging and dealing for evidence to support allegations that Clinton had an affair with former White House intern Monica S. Lewinsky and urged her to lie about it under oath.

WILY OPPONENT. Still, by pushing family-friendly programs, Clinton is appealing to Americans to stand by their man. "This is not a time to rest," he told the joint session of Congress. "It is a time to build, to build the America within our reach."

Clinton's policy offensive may play well with voters. But in Washington, it's unclear how far his initiatives or the possibly compromised President can now go. Of critical importance is how Republicans handle the situation. Their interests may, in fact, be better served with a wounded Democrat in the White House for the next three years rather than a relatively scandal-free Al Gore who can run again in 2000. Says one corporate lobbyist with close ties to the GOP: "A Gore who is enjoying a honeymoon with the public is a much stronger foe than an embattled Clinton."

But even a hobbled Clinton may be a wilier adversary than the GOP thinks, especially when he's pushing attractive initiatives to which Republicans have no answer. He stands a decent shot at winning new government aid for edu-cation and new consumer protections for patients in managed care. And Clinton could find strong bipartisan support for a $22 billion day-care proposal that offers tax credits and subsidies for working families. Republicans don't like the price tag, but they know a good issue when they see one.

The President also showed he's thinking strategically by urging Congress to use future budget surpluses to shore up Social Security. The tactic essentially makes the funds unavailable for Republican tax-cut plans but also opens a national debate on the retirement insurance system that could deflect attention from his personal peccadilloes. "If there's any issue that will make the American people forget Monica [Lewinsky], this is it," says a top Washington lobbyist.

Unless, that is, the standoff with Iraq escalates. The Pentagon is hinting of plans for a massive bombing raid on Iraq within weeks. Even the President's fiercest GOP opponents pledge to back their Commander-in-Chief in such an event.

For now, GOP strategists count on exploiting Clinton's weakened position and dismiss his wish list as resurgent big government. "Congress will take the lead," vows Senate Majority Leader Trent Lott (R-Miss.), who already plans to block any attempts to raise the minimum wage. Some business execs agree. Regardless of how Clinton's legal problems turn out, "he'll be a lame duck," says Michael C. Ruettgers, CEO of EMC, a data-storage company based in Hopkinton, Mass.

The first test will come soon--as Republicans and Democrats fight over tax-cut and spending plans in the 1999 budget. A few weeks ago, the White House and Hill Republicans seemed likely to split the difference between Clinton's $75 billion in new programs and the GOP's $100 billion in tax breaks, which include shrinking the marriage penalty and lowering estate taxes. Republicans are now convinced that Clinton will have to come closer to their position.

NAGGING FEAR. The new balance of power could have a huge impact on the the proposed national tobacco settlement. The deal now looks iffy, says Senate Republican Whip Don Nickles (R-Okla.), because a growing number of legislators are uneasy about granting tobacco companies immunity from lawsuits. In the end, a deal may come together. But without immunity, the price would drop and Clinton would likely be deprived of the $65 billion in higher cigarette taxes he was counting on to finance his domestic priorities.

Also, the odds that Clinton's plan to extend Medicare to early retirees will go through are now "diminished dramatically," says National Association of Manufacturers President Jerry J. Jasinowski. Business lobbyists also doubt that Clinton will get his way on a minimum-wage hike. And U.S. Chamber of Commerce Vice-President Bruce Josten predicts Clinton won't even send the Senate a measure to implement the controversial global warming treaty.

There's a downside for business from a weakened Clinton Presidency, too. Corporate lobbyists will start quaking in their Guccis if he can't win measures they want. And there's a nagging fear that a wobbly President will rattle financial markets. Lewis Platt, CEO of Hewlett-Packard Co., says a scandal-plagued President hurts business. "It's distracting and keeps the country from moving ahead on the real issues."

An immediate concern: the Administration's uphill fight for $18 billion for the International Monetary Fund. Republicans will likely release $3.5 billion right away to avoid being blamed for another Asian meltdown. "Sometimes fear does the work of reason in a democracy," says an Administration official. But release of $14.5 billion more could be held up until recipients open markets and revamp financial systems.

Another plank of Clinton's global agenda is likely to suffer from the new balance of power: a renewed push for "fast track" trade authority. Clinton promised business he would pursue it again after its congressional defeat last fall. White House Chief of Staff Erskine B. Bowles is now testing corporate reaction to a scaled-down version.

But it may be too soon to conclude that Clinton will be crippled. He's digging in for the fight of his life and again determined to prove the doubters wrong and confound his enemies. If Republicans misread his weakness and trash an agenda that resonates nationally, they could be victims of this scandal as well.

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