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CLINTON JOINS FRAY - BUT QUESTIONS SURFACE

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When he joined the tax-cutting derby Thursday night with his "middle class bill of rights," President Clinton virtually assured that middle-class taxpayers are going to get a tax break in time for the 1996 election.

Big questions to be hashed out by the White House and the Republican-led Congress are: Exactly who will benefit? By how much? And how it will be paid for?Clinton's $60 billion tax-cut proposal, unveiled in a rare domestic policy speech from the Oval Office, was the centerpiece of his much-anticipated effort to bounce back from the voters' repudiation of Democratic officeholders last month.

The president's tax-cut plan - and most of his remarks - were aimed at wooing white middle-class voters who are crucial to his hopes for re-election.

Clinton voiced empathy for Americans' alienation, conceding in a brief, fast-paced address that "at this holiday season, everybody knows that all is not well with America."

He poignantly appealed for restoration of "community," telling Americans that the nation needs "less hot rhetoric and more open conversation, less malice and more charity." Clinton added: "We need to put aside the politics of personal destruction and demonization that have dominated too much of our debate."

He vowed in the next two years to put "country first and politics as usual dead last."

But in the race for the hearts and loyalties of beleaguered taxpayers, Clinton came in fourth place, delivering his proposal after three rival tax-cut plans were already on the table.

His $60 billion proposal fell squarely in the middle of the bidding, dramatically less than the $124 billion tax-cut outlined earlier Thursday by Sen. Phil Gramm, R-Texas, an expected GOP presidential candidate, and the $112 billion in tax cuts outlined by House Republicans in September.

Clinton's proposal overshadowed the $32.1 billion in cuts proposed Tuesday by House Democratic leaders, including Rep. Dick Gephardt, D-Mo.

The tax cutting drumbeat around Washington has set in motion a political juggernaut that is expected to produce a tax cut sometime in early 1995 but that won't take effect until Jan. 1, 1996 - six weeks before the first-in-the-nation New Hampshire presidential primary.

"This is not about moving left or right but moving forward," Clinton declared. "And it's not about the next election either. That's in your hands."

Like the other would-be tax cutters, Clinton was vague about where he will find the money to pay for the cuts without enlarging the federal budget deficit.

White House aides said $24 billion would come from reductions in the federal bureaucracy. By extending an existing freeze on discretionary or nonentitlement spending for another two years through 1999 and 2000, aides said they would save another $52 billion.

The total savings of $76 billion to pay for the $60 billion tax cut leaves $16 billion for deficit reduction, the aides explained.

The White House insisted the president's proposal was fairer to the middle class and more economically responsible than any Republican plan. "We're talking about how it's paid for; they aren't," Labor Secretary Robert Reich said Friday.

Chief of Staff Leon Panetta, noting that Republicans had not explained how they would finance tax relief, said every plan should be measured by whether it was "fully and honestly paid for so that the deficit does not increase."

Meanwhile, an ABC News poll taken after Clinton's speech found that 75 percent of those who heard the address approved of his plan to cut taxes, but most said he was proposing it because the Republicans forced him into it.

By putting "our marker down," a senior White House official said, the president is raising the possibility that he would veto any deeper tax cuts that don't have offsetting spending reductions.

As Clinton put it: "I challenge the new Congress to work with me to enact the middle class bill of rights without adding to the deficit and without any new cuts in Social Security or Medicare."

"We welcome the president to help us lead in a new direction," GOP Sen. Fred Thompson of Tennessee said in the Republican response to Clinton's speech. "But if he will not, we welcome the president to follow."

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Additional Information

Clinton's plan for middle-class tax relief

- Up to a $500-per-child tax credit for all children below age 13 in households earning up to $75,000 a year.

- A tax deduction of up to $10,000 a year for college or other post-high school education. Families making less than $120,000 qualify.

- A tax deduction of up to $2,000 for putting money into individual retirement accounts. Families making up to $100,000 qualify, up from $50,000 now.

- Flexibility to withdraw money from IRA accounts without penalty to pay for college education, purchase a first home, cope with catastrophic illness or care for an elderly parent.

- Job training vouchers worth $2,000 to $3,000 for workers to use at the job center of their choice.