Addressing a joint session of Congress on Capitol Hill, the President last night set out a complex mixture of higher taxes, spending cuts and boosts to longer-term investment, in effect bringing down the curtain on 12 years of laissez-faire Reagan/Bush economics. The goal is to slash the budget deficit, running at more than dollars 300bn and rising, to dollars 207bn by the end of his first term in 1997.
Hours before his speech, Mr Clinton made clear he is undeterred by the tumble on Wall Street and the complaints of special interest groups. 'My duty is to convince them, and I will,' he told a White House meeting of Republican and Democrat Congressional leaders yesterday.
In all, the President is seeking dollars 328bn of tax increases over the four financial years starting in fiscal 1994, offset by tax breaks, mostly for small businesses, totalling some dollars 80bn. The remaining savings would come through dollars 250bn of cuts, mostly in defence spending, health and welfare entitlements, and the administrative costs of government.
But it is the tax increases - steeper than expected - which will cause the greatest outcry, and test even Mr Clinton's political salesmanship, when he takes the case for his painful therapy in person to the Midwest and West in the next few days.
More than a third - dollars 126bn - of the new tax income will be generated by a rise from 31 to 36 per cent in tax rates for individuals with a taxable income of dollars 115,000, and for couples making more than dollars 140,000. Only a fortnight ago, Mr Clinton was saying the rates would not affect anyone earning less than dollars 200,000. If a 10 per cent surcharge on incomes above dollars 250,000 is included, the top rate is almost 40 per cent.
The top rate of corporate income tax goes up to 36 per cent from 34 per cent. But lower earners - the middle classes whom the President promised to help - will bear the brunt of the energy tax, designed to raise dollars 71bn between 1994 and 1998.
Mr Clinton joined battle in earnest with America's ruinously expensive health care system by proposals to trim the cost of Medicare, the federal health scheme for the old, by dollars 55bn over four years. The elderly rich will also face higher taxes on their social security welfare benefits.
The President insisted his cuts were not only fair, but essential to deal with the 'enormity' of the country's economic crisis, where for the first time a new generation faced lower living standards than its predecessor.
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