Clinton holds budget aces

The President may turn the tables on his foes as the day of reckoning looms, writes Rupert Cornwell

Washington - President Bill Clinton yesterday vowed he would veto Congressional tax and health-care reform plans, presenting himself as the last line of defence against an extremist Republican party. It is a strategy which has already given him the initiative in the looming showdown with Congress over the federal budget, and could become a winning formula for his 1996 re-election campaign.

Technically, the moment of budgetary reckoning is still three weeks off. But after a brief flirtation with compromise, the Democratic White House and the Republican majority on Capitol Hill are back on collision course, playing a game of financial chicken which, if neither side yields, could shut down the government and even lead the US into a debt default.

The battle is unfolding on two fronts: the clutch of spending bills for the year 1995-96 which began on 1 October, and a mammoth overall "reconciliation" bill laying out the detailed tax and spending cuts to meet the Republicans' goal of balancing the budget by 2002. All must be on Mr Clinton's desk by 13 November, when the current stop-gap bill authorising government spending expires.

But internal Republican disputes, the leisurely procedures of the Senate and the sheer number of bills to be passed make it unlikely that deadline any longer can be met. Increasingly the Republicans are bogged down in legislative detail, and yesterday Mr Clinton said only three of the 13 spending bills had been finished.

But the real budget wars are over taxes and Medicare, the federal health- care scheme for the elderly, which the Republicans want to cut back by $270bn (pounds 168bn) over the next seven years. The plan was expected to be approved by the House last night, but its fate in the Senate is unclear. The same goes for the $245bn (pounds 150bn) tax-cut package, which Mr Clinton says conceals a $43bn (pounds 27bn) tax increase for poorer Americans.

A year ago Mr Clinton met crushing defeat over his health care reform plan, as Republicans scared voters into believing a bureaucratic government takeover of the country's health system was at hand. This time, roles are exactly reversed.

By taking the axe to Medicare and Medicaid, the separate government scheme for the poor, it is the Republicans who are the reformers - accused by Mr Clinton of mounting a callous and ideologically driven attack on the US social-safety net, all in the name of unneeded tax cuts for the rich. "There's a right way to balance the budget and a wrong way. This is the wrong one," Mr Clinton declared.

And scaremongering is working again. Any honeymoon of ordinary voters with the Republicans after the party's historic sweep of Congress last year is long over, with 55 per cent of respondents in a recent survey saying that the more they heard what Congress was up to, the less they liked it. Asked to choose between tax cuts and "saving Medicare", voters by far prefer the latter.

By contrast Mr Clinton, preacher of change in 1992 but now champion of the status quo, is enjoying his highest approval ratings in months, and in a presidential match-up easily beats the Senate majority leader, Bob Dole, the current leading Republican candidate.

So far the Republican leadership betrays few signs of nervousness. Dismissing Mr Clinton's protestations as "a joke", and insisting that no President would dare veto a balanced budget, Speaker Newt Gingrich says he will deliver the bills at the appointed hour.

Mr Gingrich also seems determined to make congressional approval needed for an increase in the US government's $4,900bn (pounds 3,060bn) debt ceiling conditional on Mr Clinton's acceptance of the reconciliation bill in its entirety. This week the Treasury announced it was scaling back some future borrowings, but the ceiling will still be hit in mid-November. At that point, if impasse continues, the US will default on some bond redemptions, possibly throwing financial markets into turmoil.

But as endgame approaches, Mr Clinton holds the better cards. For one thing Republicans are divided, not least Messrs Gingrich and Dole themselves. Faced with a Clinton veto, the instinct of Republican moderates like Mr Dole would be to cut a deal.

Mr Gingrich, though, is increasingly prisoner of the radical young Republicans who entered Congress last year. He is also learning the lesson of any would-be budget balancer. As the Republican landslide last year showed, everyone wants to get rid of the deficit. As the waning popularity of the Republican Congress now proves, no one wants to pay for it.