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Budget-Cutting Bills Advance; School-Funding Bill Stalls

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The House passed a vast bill late last week that would curb entitlement spending on programs such as Medicaid, student loans, welfare, and school meals--and radically restructure many programs--as part of the Republican majority's seven-year balanced-budget plan.

The Senate was expected to pass its version of the so-called budget-reconciliation bill late last week. It also aims for a balanced budget by 2002, but its reductions in student-loan programs would be less drastic.

Both versions include $245 billion in tax breaks over seven years, including a $500 per-child tax credit for most families.

A House-Senate conference committee could begin work this week on ironing out the differences.

President Clinton pledged to veto either version unless proposed spending in certain areas--such as education--is increased. And he vowed that he would not be intimidated by lawmakers' decision to include in the huge bill provisions that increase the maximum federal debt.

"It's economic blackmail, pure and simple," Mr. Clinton told reporters. "I'm not going to let anybody hold Medicare, or education or the environment or the future of this country hostage."

But Oct. 26 clearly belonged to House Republicans, whose reconciliation bill passed 227-203.

"If we balance the budget, we destroy the fear in the hearts and minds of parents about the future of our children and unleash a prosperity in this country that's unimaginable," Budget Committee Chairman John Kasich, R-Ohio, declared on the floor.

The bill would save $10.2 billion over seven years in student-aid spending, with provisions that include eliminating the federal direct-lending program as well as the six-month grace period on loan interest after a borrower's graduation. (See Education Week, Oct. 4 and Oct. 11, 1995.)

Senate Amendments

It would also convert the federal school-meals programs to block-grants to states, slowing spending by $7 billion through 2002.

The Senate bill does not include that provision. But both bills would eliminate guaranteed coverage under the main welfare program and the Medicaid health-insurance program, limit spending on those programs, and give states a great deal of authority over how to spend the money. (See Education Week, Sept. 27 and Oct. 25, 1995.)

In an effort to shore up support for the bill, House leaders at the last minute added about $9 billion in Medicaid spending for states that would not fare well under the bill's allocation formula.

No amendments to the House bill were allowed on the floor. A substitute bill crafted by a coalition of conservative Democrats was rejected 356-72.

In the Senate, where dozens of amendments were offered, an amendment offered by GOP moderates to restore $5.9 billion to the student-loan programs passed 99-0 after the leadership agreed to back it in order to gain the votes needed to pass the bill.

The amendment struck a proposed loan-origination fee for colleges, restored the grace-period subsidy, and eliminated a proposed interest increase on parent loans.

Democrats criticized a provision that would cap at 20 percent the amount of total student-loan volume that could be administered through direct lending, arguing that Republicans were working to save bankers' student-loan profits.

"The Senate said no to competition ... and yes to favors for the well-connected few," Secretary of Education Richard W. Riley said in a written statement.

Spending Bill Stalled

Meanwhile, the Senate's 1996 spending bill for the departments of Labor, Health and Human Services, and Education continued to languish as senators made little headway in behind-the-scenes talks.

That bill would reduce the Department of Education's discretionary spending by $2 billion. The version passed by the House would trim $3.5 billion.

"Money is an issue, but it's not the issue that has prevented us from moving ahead," a Senate Republican aide said.

Instead, moderate Republicans are resisting an effort by conservatives to put abortion restrictions in the bill. And Democrats continue to insist on removing a provision that would let federal contractors hire replacements for their striking workers.

If a compromise is not struck, it is unlikely that the bill could pass in the Senate, where 60 votes are required to shut off debate.

"Basically, there is no room for compromise," the GOP aide said.

Throughout last week, the White House continued its effort to highlight how the budget bills would reduce spending on children.

"The issue here is that we will be at the edge of a cliff if we don't wake up right now and realize the total scope of these cuts," Carol Rasco, the president's domestic-policy chief, said in an interview.

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