Clinton's Test of Courage on Tax Policy Comes Early to Reduce the US Deficit, the President Is Considering Politically Unpopular Measures to Raise Taxes on Social Security Benefits

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POLITICAL operatives commonly refer to the subject as the "third rail" of American politics, in reference to the dangerous electric current-carrying subway track.

Sen. Daniel Patrick Moynihan (D) of New York called it a "death wish" on television Sunday.

But President Clinton and his aides have telegraphed that one deficit-control option they are studying is cutting benefits or raising taxes on Social Security benefits. The economic package Mr. Clinton will announce Feb. 17 is shaping up as a test of courage, followed by a similar test of salesmanship.

But Clinton needs to find some money somewhere. The economic package Clinton will announce is expected to include $31 billion to stimulate growth and investment, and to repair roads and bridges. But it will also include a plan to reduce the deficit.

That translates into some Americans either paying more money, receiving less, or both. He telegraphed this in his inaugural address by warning of the need for sacrifice.

Entitlements - payments that automatically go out to the poor or the elderly every year - are the biggest ticket items in the federal budget. Medicare for the elderly and Medicaid for the poor are the fastest-growing budget categories. Together they will surpass defense spending a few budgets hence.

Social Security spending is close to surpassing the defense budget. But it stands separate from other spending. Social Security taxes go into a trust fund from which benefits are paid.

Unlike the federal budget, the Social Security Trust Fund is in surplus. Although most Americans draw out far more from Social Security than they ever contribute, a growing economy and mushrooming work force keep the fund sound.

The two major options that have leaked from Clinton administration councils are freezing or reducing cost-of-living adjustments for Social Security benefits and raising taxes on benefits for high-income retirees.

Clinton is caught in strong political crosscurrents. The primary issue for people who voted for Ross Perot - 19 percent of those who voted in the latest presidential election - is cutting the deficit. …


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