WASHINGTON -- Next year's expected push by the municipal market to ease some of the curbs on tax-exempt bonds to spur improvements in infrastructure financing may be doomed before it even gets under way.

At the very least, the drive is likely to run into a budgetary and political stone wall.

Here's the depressing scenario that has been emerging. President Clinton is likely to propose as early as December a legislative plan for financing infrastructure improvements that lobbyists predict will contain proposals to ease the curbs on tax-exempt bonds.

The plan, which bond market participants hope will allow greater use of private-activity bonds for infrastructure projects, is expected to be included in the administration's fiscal 1996 budget proposal.

Once proposed, the plan will go to Congress where, because it contains tax proposals, it will have to be considered by the tax committees of both the House and Senate.

So far, so good. But that's where the plan will run into the first barrier -- the new Senate requirement that the cost of tax proposals be calculated over a 10-year period, rather than the previous five-year standard.

The requirement -- spelled out by this newspaper in July and emphasized by former Rep. Beryl Anthony in an interview last week -- is likely to show a revenue loss from a comprehensive infrastructure package with bond proposals that Anthony says "would be astronomical."

The proposal to ease the curbs on 501(c)(3) bonds that was included in the Senate Finance Committee's ill-fated health care reform plan was estimated to cost $1 billion over 10 years, so it is not hard to imagine what a comprehensive infrastructure plan with bond proposals might cost.

But even if Congress decides the price is worth it, one catch lawmakers face is whether they are willing to enact either the painful spending cuts or tax increases that will be needed to pay for the plan to conform to current policy that requires all tax measures to be revenue neutral.

That debate is likely to bring up a second, and perhaps, insurmountable obstacle.

Any discussion of possible tax increases or spending cuts is going to trigger an equal and opposite demand for tax cuts.

There are already signs that Clinton may try to resurrect his ill-fated proposal for an income tax cut for middle-income taxpayers.

But even if he rejects that impulse, congressional Republicans plan to propose a middle-income tax cut that could keep Congress tied up in knots next year.

If proposals for a tax cut take on new life, any infrastructure proposal with its attached bond proposals would be doomed next year because Congress could not raise enough revenue to pay for both.

Faced with the new 10-year revenue estimates and the prospect of a fight over a tax cut, prospects for the long-awaited infrastructure bond proposals are gloomy at best.

Next: Can and should the infrastructure bond proposals be exempted from the 10-year revenue estimates?

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