Clinton Tells Nation That All Must Pay to Restore Economy : Budget: The President concedes a middle-class tax hike is needed to reverse the fiscal slide. But he insists that 70% of the increase would be on those earning over $100,000.

WASHINGTON — President Clinton, conceding he cannot reverse the nation’s economic slide without raising taxes on the middle class, on Monday called on virtually all Americans to endure sacrifice to pay for the economic-growth and deficit-reduction program he will present to Congress on Wednesday.

Mixing a populist appeal with the majesty of an Oval Office setting, the President urged a national television audience to resist special-interest lobbyists and defenders of the status quo, and to join him in a crusade to restore the nation’s economic future.

“For the first time in more than a decade, we’re all in this together,” Clinton said in his first televised address to the nation since becoming President.

“Change this fundamental will not be easy, nor will it be quick,” he said. “But at stake is the control of our economic destiny. Within minutes of the time I conclude my address to Congress Wednesday night, the special interests will be out in force. Those that profited from the status quo will oppose the changes that we seek. . . . They are the defenders of decline. And we must be the architects of the future.”

In an effort to persuade middle-income taxpayers they will be asked to sacrifice only after the wealthy will have paid their fair share, Clinton said that 70% of his tax increases would be levied on those earning more than $100,000 a year. Although he did not elaborate, Clinton already has proposed higher income tax rates for wealthy households.

In a direct admission that he will be unable to honor his campaign promise to reduce middle-class taxes, Clinton said he could not achieve his goals of long-term deficit reduction and job creation without boosting the taxes of the vast majority of Americans. He blamed the turnabout on recent upward revisions in estimates of future federal deficits.

“I had hoped to invest in your future by creating jobs, expanding education, reforming health care and reducing the debt without asking more of you. And I’ve worked harder than I’ve ever worked in my life to meet that goal,” Clinton said. “But I can’t--because the deficit has increased so much beyond my earlier estimates and beyond even the worst official government estimates from last year.

“We just have to face the fact that to make the changes our country needs more Americans must contribute today so that all Americans can do better tomorrow,” Clinton said.

Using several computer-generated charts, Clinton laid the blame for the nation’s economic slide squarely on the Republican Administrations of the last 12 years. He said the federal deficit had “exploded” under former Presidents Ronald Reagan and George Bush, growing from $80 billion to more than $300 billion.

He noted that the current economic expansion has created far fewer jobs than previous recoveries and has left 9 million Americans still jobless two years after the recession of 1990-91 technically bottomed out.

Senate Minority Leader Bob Dole (R-Kan.), responding to the President’s address, offered assurances that “Republicans in the Congress are ready to get the job done. We want to cooperate with President Clinton to cut the cost of government and to slash the federal deficit. But Republicans also want to cooperate with you, the American people.”

“Before President Clinton demands that the farmer, the nurse, the factory worker, the shop keeper, the truck driver, or our senior citizens, send one more dime to Washington, they should demand of President Clinton, and those of us in Congress, that every outdated program, every bloated agency, and every item in the federal budget takes the hit it deserves, because without real spending cuts and an across-the-board sacrifice, the American people will be short-changed again by a government that refuses to change.”

Clinton offered no new specifics on the plan, which will be formally unveiled in an address to a joint session of Congress Wednesday night. But the key elements are already known: a $31-billion short-term stimulus package of public works spending and business tax cuts designed to create 500,000 jobs by the end of next year; $250 billion in spending cuts, including specific reductions in 150 domestic programs, and about $250 billion in higher taxes on corporations, the wealthy, and all forms of energy use.

The proposed changes include increased taxes on the Social Security benefits received by higher-income retirees.

The stimulus plan contains new spending targeted specifically at children, including immunizations and increased funding of the Head Start preschool program.

One lawmaker who attended a White House briefing Monday said that while the energy tax would affect all Americans, the plan includes tax relief for working families earning less than $30,000 a year. Another lawmaker said the program would include higher levies on alcohol and tobacco, although the White House has not confirmed that.

Rep. Marcy Kaptur (D-Ohio) said that Clinton told a group of Democratic members of Congress he hoped to reduce the size of the deficit to 2.5% of the overall economy by 1997, from the current level of 5.4%. That way he could meet his pledge of halving the deficit in his first term without having to meet hard dollar targets, she said.

The Administration has resorted to creative accounting to make the spending and tax sides of the ledger balance. White House Communications Director George Stephanopoulos said at a briefing, for example, that taxing a greater portion of the Social Security benefits of relatively well-off retirees would be counted as a spending cut--because it would mean less total benefit for those retirees--rather than a tax increase.

He also said that while the Administration was confident of the 500,000 new-jobs figure, it had not made an estimate of how many jobs might be lost because of higher taxes on energy and corporations.

Stephanopoulos said Medicare payments to doctors and hospitals might be reduced in the near future as a way of cutting the deficit, but Medicare benefits would not be cut as part of the program to be outlined on Wednesday. Any adjustment to recipient benefits would come as part of the overall health care reform package under study by the commission led by First Lady Hillary Rodham Clinton, he indicated.

Monday’s address to the nation served as the electronic introduction to a massive public relations campaign to sell the Clinton economic plan to Congress and the American people.

Clinton and the entire Cabinet will take to the road Thursday to explain the President’s proposals and seek public support for them. Cabinet officers will return to their home states to address business groups, university audiences, lawmakers and television viewers.

Clinton will go to St. Louis; Chillicothe, Ohio, and the Hudson Valley of New York on Thursday and Friday, and has booked a trip to California for Sunday and Monday. He is even considering taking questions from members of the House of Representatives in an imitation of the British prime minister’s “question time” before Parliament, aides said.

Treasury Secretary Lloyd Bentsen will travel to the capital of his native Texas to address lawmakers, while Agriculture Secretary Mike Espy will go home to Mississippi to speak to a joint session of the state Legislature.

Commerce Secretary Ronald H. Brown will go to New York to talk to the faculty and students of the Columbia University Business School, while Transportation Secretary Federico Pena will go to his native Denver; Health and Human Services Secretary Donna Shalala will journey to Cleveland.

In an appeal for organized labor’s support, House and Senate Democratic leaders outlined the plan for the executive council of the AFL-CIO at the union’s annual gathering in Bal Harbour, Fla., over the weekend.

AFL-CIO president Lane Kirkland all but endorsed the President’s program, saying: “We expect to be relatively supportive of the economic policy program as we comprehend its general thrust and outlines.”

Clinton will turn to the tools of modern political campaigns to peddle his plan, according to David Wilhelm, Clinton’s presidential campaign manager and now chairman of the Democratic National Committee.

The DNC is organizing “watch parties” for the Wednesday address, plans to send out about 500,000 pieces of direct mail to party volunteers and contributors and is faxing out daily talking points to about 1,500-2,000 people a day.

“We suffered in the first couple weeks of the new Administration for not having (the faxes),” Wilhelm said. “People were not provided a clear understanding of the rationale for some of the early moves.”

Former Michigan Gov. James J. Blanchard, a close friend and adviser of the President, told Clinton last week that he won’t get a second chance to address the nation’s economic ills. He advised him to be bold in presenting his plan and tireless in selling it.

Blanchard entered office in 1982 with a bulging state budget deficit and immediately rammed the largest tax increase in Michigan history through the state Legislature to help balance the books and restore the state’s credit rating.

He said that he failed to prepare the public adequately for the tax increase, and he was almost tossed out of office in a recall movement. His popularity plummeted from a 60% favorable rating to 30%. But four years later, with the state back on its fiscal feet, Blanchard was reelected with the largest winning margin this century.

“My caution to Clinton last week was, people may say that they want him to deal with the deficit, they’ll say they will sacrifice as long as everybody else has to,” Blanchard said in an interview. “But when he does it, they’ll say, ‘I didn’t think you meant me. ‘ “

“I think the President will have a much more difficult time selling deficit reduction and public sacrifice than he realizes,” said Blanchard. “There is no political future in administering pain to people.”

Times staff writers David Lauter and William J. Eaton contributed to this story.

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