WASHINGTON - The Clinton administration will give top priority to preserving the President's proposed urban empowerment zones and permanent bond extensions when House and Senate conferees meet over the budget package next month, a top White House official said Friday.
"Although we stood back while the bill was being redrafted in the Senate, we intend to be very involved in conference to ensure our priorities are part" of the final bill adopted by Congress, Office of Management and Budget director Leon Panetta said in an interview.
Restoring the urban empowerment zones, which were taken out of the bill in the Senate but were included in the House version of the legislation, will be among the President's top three priorities, Panetta said. The Clinton zone plan includes a provision that would create a new type of exempt facility bond used to finance businesses in the zone.
Panetta also indicated that the administration will fight for the proposed permanent extensions of the tax exemption for mortgage revenue bonds and small-issue industrial development bonds adopted by the House. The Senate scaled back those extensions, proposing a new expiration date of June 30, 1994.
The mortgage bond and IDB exemptions expired June 30, 1992, and both the House and Senate bills would make the renewal retroactive to that date. Panetta described the bond extensions and other proposed tax extensions as one of the principle areas of disagreement between the House and Senate bills, and one in which the administration will side squarely with the House.
The OMB director's remarks came only hours after the Senate narrowly passed its version of the bill by 50 to 49 early Friday morning with the boost of strong personal-lobbying by the President and his staff. Panetta said the Senate bill includes between 75% and 80% of Clinton's original economic plan, while the House bill encompasses close to 90%.
In the wee hours before the final vote, the Senate unanimously approved two resolutions calling for the permanent extension of mortgage revenue bonds and the adoption of urban enterprise zone legislation, both sponsored by Sen. Joseph Lieberman, D-Conn.
The resolutions, while not binding, provide support and guidance to the Senate Finance Committee conferees as they negotiate a final tax plan with their House counterparts.
Senate Majority Leader George Mitchell, D-Maine, and other committee Democrats have already stated that they are likely to accept the House empowerment zone provision in conference. They say the proposal was excluded from the Senate version primarily for technical budgetary reasons.
Similarly, Sen. Donald Riegle, D-Mich., and other committee members have said they hope to restore the permanent mortgage bond extension in conference. They say it was cut back by the committee only because it lacked the revenues needed to pay it.
One other bond item originally proposed by Clinton, but dropped by the Finance Committee, was not mentioned by Panetta or addressed by the full Senate in its debate on the $500 billion budget plan last week. That is Clinton's proposed exemption from state volume caps for high-speed rail bonds, also included in the House bill.
Another item Panetta said the administration will fight for in conference is the President's proposed deficit reduction trust fund, which will be devoted to paying down the $500 billion in debt promised with adoption of the package.
Panetta denied the widely held view that the trust fund idea is only symbolic or a gimmick, saying that it really is needed to ensure that the taxes and spending cuts included in the budget plan are not used simply to support additional spending initiatives in Congress.
Because of the package's potential to slow the economy after it is adopted in the next few months, Panetta said he believes the Federal Reserve is, and should be, adopting a policy of steady interest rates.
"Since we're on the threshold of putting the economic plan in place, it behooves everybody to be steady as you go for now, including the Fed," he said. The low interest rates already induced by the plan should be sufficient to keep the economy growing after adoption, he said.
The dividend the economy is already experiencing from lower interest rates, if sustained over the next five years, could lower the deficit by another $100 billion beyond the administration's current deficit reduction projections, Pasnetta said.