I Hear You, I Hear You

By MICHAEL DUFFY WASHINGTON

Bill Clinton should have known his energy tax was in jeopardy when lobbyists who opposed it offered the people of Billings, Montana, a free lunch of cold cuts and chocolate cake. Citizens for a Sound Economy, a Washington antitax group, placed full-page ads earlier this month in the Billings Gazette, inviting residents to a noon rally to learn the evils of the President's proposed tax on the heat content of fuels. More than 150 people -- a virtual mob by Big Sky standards -- gathered at a downtown hotel to hear a Washington economist explain that the tax would cost every Montana family $500 a year and deprive the state of 1,500 jobs. After urging citizens to telephone their disapproval to Montana's Max Baucus, a Democrat on the pivotal Senate Finance Committee, the economist invited his audience to help themselves to turkey, ham, cheese, salads, cake, apple pie and ice tea.

Such old-fashioned politicking, quietly replayed across a belt of carefully chosen Western and Midwestern cities and towns this spring, finally caught up last week with Clinton's new-fashioned energy tax. The well-organized lobbying buried the $72 billion BTU levy that was the centerpiece of the President's deficit-reduction plan. A chastened Clinton pulled back from the bruising fight and left the Senate Finance Committee to wrangle over a replacement plan that included some combination of a gasoline tax and cuts in Medicare. The negotiations will be tense as the committee struggles to meet its deadline this Friday. Said Treasury Secretary Lloyd Bentsen, the Administration's economic point man: "Sometimes I chew the rug."

Weakened during his first 20 weeks in office, Clinton appears to be seeking the path of least resistance. He is hosting small dinner parties for the Washington insiders he once vowed to ignore. He withdrew from hard-nosed budget bargaining in part to avoid further loss of political capital. Some of this is pragmatic politics, because to remain in the fray over arcane tax provisions, said a White House official, "is a prescription for failure." But there are also signs that Clinton is increasingly spooked by opposition of almost any size. Last week he backed away from a widely leaked plan to name Bruce Babbitt to the Supreme Court when environmentalists complained that they would be losing their key ally at the Interior Department. When Robert Dole of Kansas and Orrin Hatch of Utah objected to Babbitt's lack of courtroom experience, it was more flak than Clinton could bear.

The President set his sights on federal Appeals Judge Stephen Breyer, summoning him from Boston for Friday lunch at the White House and immediately boosting the jurist to front-runner status. But weekend reports that Breyer has a "Zoe Baird problem" clouded what had become a near certainty. As Breyer volunteered early on to the Administration, he had failed to pay almost $5,000 in Social Security taxes for an 81-year-old part-time domestic in his employ since 1980. Last February, even before Supreme Court Justice Byron White announced his retirement, Breyer paid up. Although White House aides maintained Clinton was "still leaning" toward the jurist, it was a paltry echo of earlier encomiums.

Clinton's latest approach to his economic plan is designed to make his colleagues on the Hill take some of the heat as they search for a compromise. "You want to let this thing roll on its own," explained one senior Administration official, "because you don't know where it's going." The ( problem, however, is that effective control of Clinton's economic plan has now passed from the White House to Washington's army of special interests. The dismemberment of his energy tax is a case study in how difficult it has been for Clinton to make good on his pledge to rebuff those diverse interests in favor of the larger good.

In the failure of the BTU tax, Clinton is simply reaping what he has been sowing ever since he unveiled his economic plan in February. Clinton undercut his claim that all Americans would sacrifice equally. He granted a steady string of energy-tax exemptions to key lawmakers, special pleaders and important industries. Farmers won exemptions on diesel fuel for tractors. Majority Leader George Mitchell won an exemption for home heating oil, an important commodity in New England. Clinton himself agreed in an April telephone call (from a Congressman at a pay phone in Oklahoma) to change the way the tax would be collected on natural gas, electricity and oil.

The effect of all the dealing, lobbyists say, was to encourage other special interests to seek similar exemptions in the name of fairness. "While we're labeled the lobbyists and special interests by the President and Lloyd Bentsen," said Jerry Jasinowski of the National Association of Manufacturers, "they put in over a dozen special-interest provisions in this thing."

Once the bazaar was open, the professionals rushed in. In April Jasinowski's group got together with the American Petroleum Institute, 1,600 large companies, small businesses and farmers to form the American Energy Alliance (AEA), a group designed solely to defeat the BTU tax. The coalition paid more than $1 million to Burson-Marsteller, a public relations firm, to deploy nearly 45 staff members in 23 states during the past two months. Burson's goal was to drum up as much grass-roots outrage about the BTU tax as possible and direct it at the swing Democrats on the Senate Finance Committee, including David Boren of Oklahoma, Max Baucus of Montana, Kent Conrad of North Dakota, John Breaux of Louisiana and Thomas Daschle of South Dakota. The goal was to win at least one Democratic vote; that would be enough to stop the tax in the Finance Committee, where the Democrats hold an 11-9 majority.

Like a death in the Old West, the demise of the BTU tax came fast and cheap. Burson's operatives drafted anti-BTU editorials and sent them to copy-hungry weekly newspapers. They helped school boards figure their estimated annual energy taxes. They commissioned local economists to produce studies about potential job loss and then organized rallies and press conferences to publicize the results. They bombarded TV and radio stations with feeds from local business owners angry about the BTU tax. "It was unlike anything I've ever seen," said Brent Stanghelle, farm-news director of radio station KMON in Great Falls, Montana. "It was like spring planting -- frantic, crazy. I couldn't begin to take all the calls."

Lawmakers deride this grass-roots clamoring as Astroturf, but no one doubts its populist impact on Congress. "Ten years ago, you could have used 10 to 15 lobbyists to kill this thing on Capitol Hill," says Jim McAvoy, senior vice- president of Burson-Marsteller's Advocacy Communications Team. "Now you have to hire 45 people and send them to 23 states. That's because all the noise is supposed to have more credibility. Lawmakers have to hear it echoed from the folks back home."

Oklahoma, an energy-rich state and home to Boren, was targeted for special attention. Because air time is inexpensive in lightly populated states, the lobbies saturated the airwaves for almost nothing: Citizens for a Sound Economy spent less than $100,000 to inundate the state with radio and television ads critical of the BTU tax and urging listeners to "spend some of your energy to stop the energy tax. Call Senator Boren at 1-800-228-6200." The AEA made a $5,000 contribution to the University of Oklahoma College of Business Administration after its Center for Economic and Management Research released a study estimating that the BTU tax would rob the state of 11,000 jobs. On May 19, the eve of rallies in Tulsa and Oklahoma City, Boren came out against the tax. Once that happened, Clinton's tenuous hold on the Finance Committee collapsed.

But Clinton had no sooner surrendered to one group when a second wave attacked his fallback position. With the BTU tax in a coma last week, Senate Democrats glommed on to a proposal by Louisiana's Breaux to raise the tax on gasoline by 7.3 cents per gal. That prompted airlines, travel agents and trucking companies to deluge Washington with complaints about the nascent "transportation fuels" tax.

But Breaux's compromise steamed lobbyists for seniors and minorities, who watched as Clinton and Finance Committee chairman Daniel Patrick Moynihan considered further cuts in Medicare and Medicaid to make up the $35 billion - difference in revenue between the BTU tax and the simpler fuel tax. Moynihan at first said most of the money would have to come from the health-care programs; by week's end the White House had trimmed that figure to $20 billion. But doctors, hospital executives and senior citizens began to scream at this prospect, unleashing their own carefully orchestrated telephone attacks on key members of the Senate. Lawrence Smedley, the executive director of the National Council of Senior Citizens, urged Clinton to abandon his new approach. "If you fail to heed this warning," said Smedley, "you do so at your own peril."

The Congressional Black Caucus joined the fray, protesting Clinton's budget cuts. "I don't want to see the poor, the middle class and the elderly pay for the victory of Big Business, Big Oil and the wealthy," declared Maryland Congressman Kweisi Mfume, chairman of the caucus. Thirty-four of the group's 39 members boycotted the President's annual South Lawn barbecue for Congress, and the caucus voted the next day to delay a planned meeting with Clinton. The White House tapped public liaison chief Alexis Herman to bind up the wounds, but black lawmakers say Herman's influence in the West Wing is minimal.

Clinton's cave-in may cost him other allies as well, since those who supported him on the BTU tax were feeling duped. Moderate House Democrats who voted for the tax in late May only to watch the President abandon it without a fight last week, were beginning to liken themselves to Charlie Brown and Clinton to Lucy with the football. "I remember the President telling us specifically that if we went out on a limb over the BTU tax," said Congresswoman Louise Slaughter of New York, "he would be there with us. But now we don't even know where the limb is."

Meanwhile, the assault on Clinton's economic plan has imperiled the timing of his other crucial initiative, health-care reform. Because the President had planned to use the Medicare cuts to help pay for health-care reforms later this summer, Clinton's aides are now debating whether to curtail the scope of the reforms or postpone them until next year, or both. "Just look what happened to the BTU tax," said one official. "When you've got something that entails controversy and hard choices, why put it out there and let it sit there and get pummeled?" At a dinner late last week, Clinton insisted he wanted to unveil the plan this year, but he added, "We just have to get the budget passed and see where we stand."

As the intraparty revolt spread, top House leaders telephoned Clinton and urged him to step back from the budget battle to preserve his leverage for the joint House-Senate conference committee later this summer. It is there, they noted, that the final tax bill will be written; everything until then is mere prelude. Within hours White House officials picked up on the theme. "There's no special magic in the BTU," said a senior official. "What's important is the final product."

But the tactical withdrawal doesn't hand Clinton a win; it just stops the bleeding for now. His decision to throw a central element of his economic program overboard raised old questions about what he stands for. At nearly every appearance last week, Clinton talked about "principles" in the budget fight, but his list is dwindling down to little more than $500 billion in deficit reduction. That's a worthy goal, but it too could fall victim to special-interest pleading unless he stays engaged.

Clinton's decision to let the Senate take the lead for now is risky business. It could prove to be a successful way to put more pressure on legislators to find their own budget cuts -- and use up some of their own political goodwill in the process. If the result is a compromise that comes even close to Clinton's deficit-reduction goal, his strategy will be deemed a success. But if Senators fail to produce anything but gridlock, they won't be the ones to suffer humiliation.

With reporting by Ann Blackman and Nancy Traver/Washington