Clinton sees huge surplus, would trade tax cuts for drug plan

WASHINGTON - President Clinton projected an astronomical $1.87 trillion budget surplus for the next decade on Monday and asked Republicans to use part of it to swap prescription drugs benefits for a tax cut. Sensing a possible election-year trap, GOP leaders all but scoffed at the proposal.

Barely five months after estimating a 10-year surplus of $746 billion, the economy's relentless growth and the resulting piles of federal revenue let Clinton more than double that figure - all without counting Social Security's own huge surpluses.

It is the non-Social Security part of the surplus that politicians feel free to use for spending or tax cuts. Clinton proposed using the extra money to eliminate the publicly held national debt faster, to augment his proposal to add prescription drug coverage to Medicare and to create a $500 billion kitty for bolstering peoples' retirement plans, new tax cuts or any other purpose.

Clinton said he telephoned congressional GOP leaders and asked them to agree to his new 10-year, $253 billion prescription drug plan and consent to using Medicare's surpluses only for debt reduction. In exchange, he said he would accept a reduction in the so-called marriage penalty similar to the 10-year, $248 billion version the Senate Finance Committee has approved.

''These are goals that both parties and all Americans agree on,'' Clinton said in Rose Garden remarks. ''It would be wrong to let politics keep us from seizing the opportunity to achieve them.''

Eliminating the marriage penalty, extra taxes many two-income couples pay over what they would pay if they were single, has been a top GOP priority this year.

Even so, the popular appeal of prescription drugs outweighs that of tax cuts. And many Republicans were reluctant to participate in negotiations that Clinton could define as pitting his desire for drug benefits against their drive for a tax cut.

House Speaker Dennis Hastert, R-Ill., pointedly said lawmakers would use ''the regular order'' - the normal legislative process and not high-level talks - for marriage penalty and prescription drug bills.

He said Clinton's new prescription proposal could be so costly ''that it will ultimately bring down the entire Medicare system,'' adding that he hopes Clinton ''resists the temptation to politicize this issue.''

Senate Majority Leader Trent Lott, R-Miss., praised the elements of Clinton's proposed deal but added: ''What I will not do is engage in political horse-trading that gives short shrift to the long-range challenges we face as a nation.''

Unquestionably, the enormous infusion of cash could make it easier for the two parties to cut a budget deal this year because of the sheer amount of available money.

Many Democrats would be tempted to cut a deal involving new drug benefits under Medicare and claim credit for it. And many Republicans would be happy to win tax cuts while removing the failure to enact a prescription drug plan as a club Democrats could use against them.

But many members of both parties are reluctant to resolve issues they could highlight during this fall's election campaigns. Also weakening prospects for a deal are the vast philosophical gaps - the GOP's privately operated prescription proposal versus Clinton's government-run plan - and the mere 40 legislative days left before Congress plans to adjourn for the year.

The new projections allowed Clinton to project an overall surplus, including Social Security, of $4.19 trillion over the next decade, nearly a $1.3 trillion improvement since February.

That would include a total surplus this year of a record $211 billion if his proposals were enacted. That would mark the third straight year of budget surpluses and the eighth consecutive year in which the government's bottom line has improved, both of which would be firsts.

With the newfound money, Clinton proposed:

-A prescription drug benefit costing $58 billion more than he proposed earlier this year and far more than the House GOP plan. It would start in 2002, a year earlier than Clinton had planned, and cap out-of-pocket costs at $4,000.

-Eliminating the $3.5 trillion publicly held portion of the $5.7 trillion national debt by 2012, a year sooner than he proposed in February. The remaining $2.2 trillion of the debt is money the government owes its own trust funds for Social Security and other programs.

-Using interest savings from debt reduction to bolster the Social Security and Medicare trust funds in preparation for the baby boomers' retirement. This would push Social Security's projected solvency to 2057 and Medicare's to 2030. But it would not prevent annual Social Security payments from exceeding revenues in 2015 or Medicare's in 2010.

-Creating a $500 billion ''reserve for America's future'' that he said could be used for ''key national priorities'' like retirement savings or education.

-Using the $403 billion, 10-year projected Medicare surplus only for debt reduction. That would speed up debt reduction but trim the remaining surplus to $1.47 trillion.