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ELECTIONS '94 : 'Contract With America' Gets Closer Look : Policy: Lawmakers and observers are going over the fine print of GOP plan. Balanced-budget amendment is likely to pass, some say.

November 10, 1994|PAUL RICHTER | TIMES STAFF WRITER

WASHINGTON — Derided by Democrats only days ago as a campaign blunder, a document called the "contract with America" has become the closest thing available to a road map to the new Republican Congress in the aftermath of the GOP's stunning sweep to power on Tuesday.

With powerful momentum, Republicans are likely to make good on some of the plan's proposals and at least score a few political points on others. "It's the American people's revolution," Rep. Newt Gingrich (R-Ga.), soon to be the House Speaker, declared Wednesday. He vowed to make good on a first batch of the proposals when the next congressional term begins in January.

The Republicans are not alone in attaching significance to the document. "We're going to have to pass a few copies of this around," said Sen. John B. Breaux (D-La.). "A lot of Democrats haven't read this as closely as they should have."

The four-page document includes some proposals that Gingrich can impose on the House as Speaker and others that seem likely to succeed in passing both houses. But others, reflecting Gingrich's brash brand of new Republicanism, are probably too radical or too expensive to win passage.

In the most-likely-to-pass category are proposals to enact a constitutional amendment requiring a balanced federal budget and a proposal to adopt a line-item presidential veto. The balanced-budget amendment was beaten back in Congress last March, but the notion is popular with the public and many analysts say they believe that the election results will make members of Congress afraid to oppose it.

A constitutional amendment must be passed by a two-thirds majority in each house. Then it would be sent to the states, where three-quarters of the legislatures would have to ratify it to make it part of the Constitution.

Still, some uncertainty remains about how much support the proposal would win from other Republican leaders. At a press conference Wednesday, Senate Minority Leader Bob Dole (R-Kan.) politely ducked a question about his plans to push such an amendment when he becomes majority leader.

The proposal's critics contend that it would straitjacket policy-makers and force huge cuts in spending, notably in the medical programs and other entitlements that continue to grow rapidly.

The line-item veto, which would allow the President to remove individual spending items from the budget, was endorsed by Clinton during the 1992 campaign. But some congressional experts say they wonder whether Republican zeal for the proposal will continue because the new balance of power would give a Democratic President the authority to delete items from spending plans of Republican-dominated appropriations committees.

Also given a good chance of success is the contract's call for term limits for members of Congress. But the Republicans' success in the past election could throw doubt on the argument that incumbents have too great a hold on power.

Gingrich said that during the opening days of the new Congress, he plans to push a series of contract proposals that he believes have unusual resonance with the public.

One is a plan to make it tougher for convicted murderers to avoid capital punishment, in part by limiting judicial discretion. Another would subject Congress to the same federal laws--including wage-and-hour, safety and family-leave rules--to which other employers are subject.

Also given a good chance of success next year is the contract's call for a capital-gains tax reduction, long an article of faith with Republicans. The proposal has had substantial congressional backing, and analysts at the Congressional Budget Office have presented research showing that such preferential treatment for such earnings can spur investment.

But some congressional experts say they doubt that Congress would accept a cut of the size proposed in the contract, which suggested excluding 50% of capital gains from taxation and putting the maximum rate at 15%. Still, in the current environment, said Rep. Robert T. Matsui (D-Sacramento), preventing a capital-gains tax reduction "could be a problem for us."

Less likely to succeed are other proposals that some in Congress would find too expensive. These include a series of other major tax cuts, including eliminating the so-called marriage penalty, which Republicans believe unfairly penalizes couples by forcing them into a higher tax bracket; a plan to give each family a $500 family tax break and a proposal to encourage savings by setting up a so-called super individual retirement account to shelter contributions of as much as $2,000 a year.

But the problem with these cuts is largely in their size. The new IRA, the family tax cut and cancellation of the marriage penalty combined would cost more than $200 billion over five years. The contract also calls for increased military spending.

Because these proposals would threaten federal budget caps, they are considered much less likely to win support, even from some Republican members.

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