The 12-Minute Makeover

By Michael Duffy/Washington

With a re-election campaign looming, an embattled President decided to chuck % his old program and go for broke. On national TV he proposed a multibillion- dollar package of tax cuts, including expanded IRAs for medical bills, education and the purchase of a first home. That evening, an upstart in the opposition party dismissed the proposals as "too little, too late." Later the critic added, "I don't think using the IRAs to finance college loans and health care, as the President proposed, is a good idea."

The year was 1992. The President was George Bush. The upstart was Bill Clinton.

Just about everybody in Washington jumped on the tax-cut bandwagon last week. But Bill Clinton was the only one who had to do a backflip while eating his words. Such are the contortions of political reincarnation. Since his party's dismal showing in the November elections, Clinton has moved deliberately toward the center, and last Thursday night's speech was his most dramatic course correction yet. Clinton made several proposals last week similar to ones he criticized Bush for making when the patrician Texan was trying to save his presidency. The G.O.P. enjoyed the show. Said Haley Barbour, the chairman of the Republican Party: "President Clinton shares with the hummingbird the amazing ability to turn 180 degrees in a wink."

Clinton's tax cuts resemble the dealer incentives that Detroit once offered to win back buyers who had switched to Japanese cars. Clinton's "Middle-Class Bill of Rights" is designed to appeal to voters who supported him in 1992, but this year bolted to the G.O.P. -- or stayed home. As with rebates, however, there is some fine print: Clinton's $500-a-child tax credit would be available only to parents with adjusted incomes between $20,000 and $60,000 who have children under 13. Parents who earned up to $75,000 would get a smaller break, and the full $500 credit would not be available until 1998. His proposal to let parents withdraw money, tax free, from new IRA-like instruments to pay for education, medical care, first homes or elderly care would apply to parents earning up to $80,000; couples earning up to $100,000 would get a smaller deduction. And he would allow couples earning $100,000 or less to deduct as much as $10,000 a year for college tuition; the deduction for couples earning up to $120,000 would be smaller.

To avoid deepening the deficit, Clinton plans to offset the $60 billion in tax breaks with spending cuts worth $76 billion over the next five years. Most of the money -- $52 billion -- comes from simply extending the current law that freezes discretionary spending at current levels. Clinton was less specific about the rest of the cuts. This week Vice President Al Gore is expected to detail plans to save $24 billion by shrinking three Cabinet-level departments -- Energy, Transportation, and Housing and Urban Development -- and all but eliminating the General Services Administration. With the Republicans in control of Congress, Clinton's tax cuts are likely to go nowhere. Under the Contract with America, the G.O.P. wants to extend the $500- per-child tax credit to families with incomes up to $200,000 and make the new IRAs available to all taxpayers. To pay for the tax cuts, the Republicans would probably accept many of Clinton's reductions -- and then slash more deeply at domestic spending as well as Medicare and Medicaid.

Clinton's speech suggests that he is spoiling for a fight over some entitlements. He made clear last week that he won't cut Social Security or Medicare and wants to emerge in the coming budget battle as the preferred defender of the middle class. "He is saying that he will pay for his plan with cuts in energy, housing and government waste," said a White House consultant. "The Republicans say they are going to cut Medicare. That's a very interesting debate for the middle class to watch."

The 12-minute speech bore all the hallmarks of a do-or-die Clinton episode. Many aides had argued for a high-stakes Oval Office address not only to inject the President back into the debate but to force him to make the tough decisions on taxes and spending cuts. In preparation, he argued for days with his advisers about the best course, seeking ideas in memos and telephone calls. Speechwriters Bruce Reed and Don Baer produced countless drafts before Clinton finally dictated the speech on Wednesday afternoon into a tape recorder. "He was intent," said counselor Mack McLarty, "on this being his speech." Just to be sure, the outlines were discussed with a focus group on the eve of the speech.

As statements of personal growth go, the proposals represent a significant shift for Clinton, who spent the first two years trying to solve problems in education, health and child care through federal intervention. Largely foiled on that front, he is now saying to the public, in effect, "O.K., you do it yourselves." The shift is the surest sign yet that Clinton has carefully digested the lessons of the midterm elections. But it may be too late. "The real question," said Stuart Rothenberg, editor of the Rothenberg Political Report, "is whether there is any advantage here that lasts more than three days. I'm skeptical."

As they have often done at pivotal moments in the past, the Clintons invited most of the White House staff out to the South Lawn last Friday afternoon for a private holiday pep rally. Hillary Clinton thanked the troops for working so hard. And the President urged his aides to stop clapping so much lest they all catch colds. Then he laid out his challenge for the next two years. "The forces of history at work on the American people are powerful," he said. "Our job is to maximize the powerful forces, minimize the negative ones and give them every single chance we can to get ahead in this economy."

Clinton, an aide argued afterward, "feels as if he is back on track." Maybe so, but whether he'll stay there is anyone's guess.

With reporting by Laurence I. Barrett and Adam Zagorin/Washington