Is America ready for the 'us' generation?

The test of our programme cannot be: what's in it for me? The question must be: what's in it for us? - Bill Clinton

We will lower the tax burden on middle- Americans by asking the very wealthy to pay their fair share

Our plan will cut the deficit in half within four years

Clinton campaigning

I have worked harder than ever before to spare the middle classes from tax increases. But I can't

The aim is to cut the deficit by one third by 1997

Clinton last week

'OPPOSING Clinton on cutting the deficit or improving health care is like being against motherhood,' said a Washington lobbyist last week as he advised his clients not to attack the President's economic package. Washington's lobbyists and special interest groups kept their heads down as the President toured America denouncing special interests as potential saboteurs of his reforms.

Polls showed three quarters of Americans approved the plan. In Ohio, Mr Clinton was greeted by residents holding signs saying 'I want to pay more taxes'. Even the rich seemed undismayed. 'I don't think anybody with a brain cell is shocked by what Clinton said,' a Republican millionaire admitted.

By the end of the week Mr Clinton was declaring victory over sceptics who had doubted his commitment to economic change. With the bold reform programme outlined in his State of the Union address he has bounced back from the embarrassments of his first weeks in office, when he failed to find an Attorney-General and argued with the military over gays in uniform.

The White House hopes to get enough momentum behind the Clinton plan to force it through Congress without it being nibbled at by senators and congressmen defending their own constituencies. The increases in taxes, raising the rate for people earning more than dollars 140,000 ( pounds 95,000) a year from 31 per cent to 36 per cent with a surcharge for those earning more than dollars 200,000, will be easily passed by the Democratic majorities in both houses of Congress. So will the dollars 30bn economic stimulus package, which involves extra spending on infrastructure and an energy tax, even though it hits the middle classes Mr Clinton promised to protect.

The impact of the new tax on energy is reduced because the administration had the useful idea of levying it on heat content, denominated in BTUs (British Thermal Units), an obscure enough measure to blur the cost to the average driver. All this will be welcomed by the Democrats. The difficulty will come with the other part of his plan - the dollars 247bn in spending cuts over the next four years, including dollars 76bn from the defence budget.

Mr Clinton will ask members of Congress to vote against the interests which financed and elected them. For instance, he wants to reduce subsidies to the Rural Electric Administration, a relic of the NewDeal which has outworn most of its usefulness, but still has a role in poor rural states such as Arkansas. As governor of that state, Mr Clinton was its firm supporter.

Normally, by the time it emerges from Congress the US budget reflects months of negotiations. Battles are fought to prevent the closure of military bases, regardless of their usefulness. As a last resort, senators can filibuster until their special interests are met. But Mr Clinton cannot afford to back away from his spending cuts, because they are what has made the reform programme acceptable to Wall Street and much of big business. Above all, the White House wants to keep interest rates low to speed the economic recovery.

The success of Mr Clinton's economic new deal and his plans for health reform will determine the success or failure of his presidency. He is taking on not only Congress but Washington's powerful lobbies and special interest groups. They are holding their fire because they know this is a bad moment to oppose the White House. Five days before he addressed Congress, Mr Clinton had attacked the pharmaceutical companies for charging so much for drugs that American children could not be immunised. 'Pre- emptive surrender, I think, is the best strategy,' said a drug company executive. But this public humility is misleading. Lobbies, even those as powerful as the pharmaceutical industry, do not want to make permanent enemies of the Democrats at a time when they control the White House and both houses of Congress.

They also want to see if they can benefit from the reforms. Two of the most powerful lobbies in Washington, the American Medical Association - representing most of the 600,000 doctors in the country - and the insurance companies, have not been able to attack the Clinton administration over health care reform. 'You no longer hear denunciations of 'socialised medicine', with which they buried hopes for a national health care system in the 1940s,' said an adviser to Hillary Clinton, who leads the health care task force.

The lobbies are now showing weaknesses. Ross Perot targeted the lobbyists during his presidential campaign, denouncing them as 'men in thousand-dollar suits and alligator shoes'. Mr Clinton is now using the same rhetoric.

The lobbyists know Mr Clinton needs to declare a victory for his economic programme, almost regardless of the details. A sign of this was the dismissive manner with which the White House treated the discovery by Associated Press that the reduction in the deficit over the next four years was going to be dollars 168bn less than announced on the night of Mr Clinton's speech. 'Ask (Budget Director) Panetta. That's his department,' the President replied when this detail was drawn to his attention. The Republicans hoped to make some mileage out of the White House error. Mr Clinton had, after all, said his plan was straightforward and not, like theirs in the past, all 'smoke and mirrors'. But the accusation failed to stick because the Republicans have no alternative reforms to offer when the political consensus is for change.

Mr Clinton was quick to exploit their weakness, offering to consider any further cuts they proposed. 'No hot air, show me where and be specific,' he told a crowd in Missouri.

The Republicans are still bitterly divided between the centre and the radical right and are also without a leader. Their only chance of stopping Mr Clinton's package is to attract the so-called 'Boll Weevil' Democrats from the South who once allied themselves with Ronald Reagan. But Democrats of every political stripe are so jubilant at gaining control of the White House that, for the moment, they are likely to hang together.

Mr Clinton is also at his most effective when campaigning across the country and now he has the opportunity to create a political consensus behind his reforms. At the start of last week it was by no means obvious he would succeed. His poll ratings had slipped since the inauguration and his television speech on Monday had attracted poor reviews. Tom Shales, the Washington Post television critic, noted that Mr Clinton said that when he was a boy there was a name for wanting to help your country: 'We called it patriotism, and we still do.' Shales added: 'When I was a boy, we called that kind of appeal demagoguery, and we still do.'

In fact, the State of the Union speech on Wednesday reflected the political ingredients which put Mr Clinton in the White House: moderate economic reform with radical change promised for health care. Leon Panetta and the deficit hawks had persuaded Mr Clinton to give priority to reducing the deficit. But the President had also backed away from earlier suggestions of a freeze on social security. This might have alienated the core of his middle-class constituency. His populist credentials were already looking ragged with more millionaires in his 18- member cabinet than served under Mr Reagan or Mr Bush.

For the moment, Mr Clinton looks politically unsinkable. A measure of this is that, despite his appeals for solidarity in sacrifice, the White House has chosen this moment to spend dollars 30,000 building a jogging track for Mr Clinton on the South Lawn of the White House. The fact that dollars 20,000 will come from private contributors and the rest will be in the form of donated materials did not stop criticism. 'I could be wrong, but I don't think the American people will see the jogging track as an extravagance,' said Dee Dee Myers, the White House press secretary. By the end of the week she had turned out to be right.

Clinton economics, Business section

(Photograph omitted)

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