Time Not Ripe for Additional Tax Cuts, Clinton Says

Monday, Jan. 5, 1998

OnLine

President Clinton has not ruled out enacting a tax cut this year, but emphasized in remarks to reporters that cutting taxes this year would be a mistake because the federal budget is not yet in balance.

The budget deficit will be less than $22 billion in the fiscal year that ends this Sept. 30, Clinton said at a White House press conference. In September 1997, the Congressional Budget Office projected the deficit for fiscal 1998 would be $57 billion. The deficit estimates continue to fall because revenues are rising due to a strong economy.

Clinton said he objects to GOP borrow-and-spend policies that would offset the cost of tax cuts by paying for them with future government surpluses. "I want to caution everyone that I will do everything that I can to prevent anyone from using a projected future surplus as a pretext for returning to the failed policies of the past," when tax cuts were enacted without offsetting tax increases or spending cuts, Clinton said.

Congressional leaders have been pushing for tax cuts, such as eliminating the marriage penalty, on the grounds that the government budget will soon be in surplus and the money should be returned to the public.

As for a specific proposal to eliminate the marriage penalty or reduce the Social Security payroll tax, Treasury Secretary Robert Rubin also said Jan. 4 that cuts would only be appropriate when there is a surplus and he does not believe a surplus yet exists.

Responding to the remarks by administration officials, House Ways and Means Committee Chairman Bill Archer, R-Texas, said he favors tax cuts as a way to reduce the size of the government. "There’s a difference between a big government with a balanced budget and a small government with a balanced budget. I prefer a small government with a balanced budget," thus additional tax cuts would be good, he said.

Clinton also would not rule out an increase in the tobacco tax to pay for new spending initiatives. The President intends to offer a plan that protects "our children from the dangers of tobacco" and that builds on last year’s negotiated settlement to the lawsuits attacking tobacco companies for selling a product that is harmful.

Interest in Social Security

Clinton is concerned about the solvency of the Social Security system, and the administration is exploring ways to raise the public’s awareness of the problem.

One possibility would be to create a bipartisan commission to examine ways to ensure that the program will not go bankrupt, Rubin said. Another possibility would be to hold a special session of Congress to explore the issue following the November 1998 congressional election. Congress traditionally is not in session in the period between the election and the start of a new Congress the next January.

The Social Security program could be in danger when the baby-boom generation retires. Current workers pay the benefits of retirees, under the program, but when the baby boom retires, the number of individuals collecting benefits may place an unreasonable financial burden on workers. Current estimates project the system will go bankrupt in 2029.

House Speaker Newt Gingrich, R-Ga., endorsed the idea of creating an intergenerational commission to look at the retirement system. The commission would be composed of members from the pre-baby-boom generation, the baby-boom generation, and the post-baby-boom generation.

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