Their Turn to Pay?

By WALTER SHAPIRO

As Bill Clinton is learning, there is no such thing as a painless presidential promise. In August, just minutes before the win-or-die budget vote in the House, Clinton cut a deal to gain the crucial support of freshman Pennsylvania Democrat Marjorie Margolies-Mezvinsky. The price seemed paltry: the President agreed to appear this week at an entitlements summit in her suburban Philadelphia district to discuss the role of government benefit programs in fueling the deficit.

Now it's payback time, and Clinton probably longs for the days when Presidents could buy congressional votes with old-fashioned pork. Entitlements are the true Nightmare Before Christmas, especially since Clinton's Democratic predecessors put most of them in place. The Bryn Mawr summit brings into the open a potentially divisive closed-door debate within the Administration -- whether to support new limits on the government benefits that millions of middle-class Americans get.

The fixation of budget cutters on entitlements reflects the Willie Sutton rule of fiscal politics -- that's where the money is. Guaranteed-benefit programs currently eat up 49% of the federal budget, a whopping $738 billion. The largest chunk is Social Security ($319 billion), but entitlements also include Medicare, Medicaid, veterans' benefits, government pensions, unemployment insurance and farm subsidies. Only one-sixth of this money goes to Americans below the poverty line. A significant fraction of government benefit checks are cashed by the comfortably middle class. The Progressive Policy Institute estimates that families with taxable incomes above $50,000 receive 19% of federal entitlement money.

These daunting numbers give rise to a series of related questions: Can the Federal Government afford to continue to subsidize middle-class and upper- income Americans? At what income should any benefit cuts begin -- $40,000? $50,000? $100,000? Is it equitable for Washington to take tax dollars from 20- year-olds earning the minimum wage and redistribute some of the money up the economic ladder to $100,000-a-year pensioners collecting Social Security? And will the Clinton Administration risk offending potent constituencies like ! the elderly in the quest to reform government benefit programs?

These are no longer theoretical problems. The once taboo topic of means testing -- linking government payments to income -- was debated at a recent high-level White House meeting. The President mostly listened, but proponents of some kind of limitation included Vice President Al Gore, Budget Director Leon Panetta and presidential counselor David Gergen. Their rationale: only by restraining entitlements can the Administration afford new programs and further deficit reduction. "Everyone agrees this is something to be looked at," confides a senior White House official. "Even a novice looking at the budget can't help seeing what's happening to entitlement spending."

"Look but don't touch" was, in effect, the watchword of some of the President's political advisers, such as George Stephanopoulos and outgoing congressional liaison Howard Paster. Programs like Social Security and Medicare have been portrayed for decades as something that American workers had earned; trimming benefits for the affluent would be viewed as breaking a solemn social contract. (In truth, a recent Social Security beneficiary gets back what he paid with interest by age 71; anything after that is free). The Clinton political team believes the most serious problem is not Social Security but the runaway costs of Medicare and Medicaid. As outside political adviser Paul Begala argues, "All those ivory-tower elitists who talk about entitlement reform and really mean entitlement cuts should roll up their sleeves and help us reform health care."

Complicating the equation is another promise that the President made in order to pass his budget plan: establishing a bipartisan commission on entitlement reform, led by Nebraska Democratic Senator Bob Kerrey and G.O.P. Senator John Danforth of Missouri. The tentative consensus within the White House leans toward dynamic inaction, waiting for the commission's report in May to test the political waters on paring entitlements. But that would still leave unresolved a ticklish problem: Where would the savings from entitlement reform go? Congress is awash with it's-the-deficit-stupid fervor, while the Administration covets new money to pay for the President's still moribund investment agenda. "If this is a strategy to free up a little more money for the White House to spend," Kerrey says, "I'm not interested in doing it."

Clinton, who hopes to complete his consultations with Cabinet members before Christmas for the 1995 budget, is so desperate for money that one half expects to see him drilling for oil on the South Lawn. Panetta, playing the role of Dr. No, has already told the Cabinet that their initial requests were $20 billion over the congressional budget ceiling. To the dismay of some liberals, Clinton has declared the $281 billion Pentagon budget off limits. Moreover, the latest rules of the fiscal game require that new spending must be matched by offsetting cuts in existing programs. Somehow Clinton must find $16 billion to pay for such cherished initiatives as an expansion of Head Start and job- training programs, new investments in high technology and aid to communities devastated by military base closings.

Not too long ago, means testing was a notion embraced mostly by small political journals and policy wonks swimming in think tanks. But respectability came as the bipartisan cut-the-deficit Concord Coalition and investment banker Pete Peterson pushed schemes that would trim federal subsidies in gradual steps for families earning above about $40,000 a year. The new mood is reflected by Deputy Treasury Secretary Roger Altman, who declared recently, "Means testing in selected areas is an idea whose time has come."

It still strains credulity to believe that a Democratic President would dare tamper with the aura of entitlement that envelops Social Security, which must be part of any reform package large enough to make a budgetary difference. But the President knows that three more years of fiscal austerity would be a dubious platform for re-election. The tenor of the budget debate is fast changing -- and Clinton may soon be forced to choose between the sanctity of Social Security and his dreams of ambitious programs to grow the economy.

With reporting by James Carney and Suneel Ratan/Washington