Let's Make a Deal, Sen. Feinstein Said--and the White House Did : Negotiations: Pressured to support the Administration budget plan, she held out for incentives vital to California's recovery.

By GLENN F. BUNTING

Aug. 6, 1993 12 AM PT

TIMES STAFF WRITER

WASHINGTON — En route to the airport for a week of shuttle diplomacy, Secretary of State Warren Christopher put in a call last Sunday morning to the home of Sen. Dianne Feinstein.

“Hello, Mr. Secretary. Are you asking me to go with you to the Middle East?” Feinstein recalled asking.

“No, I’m asking for you to vote for the President’s budget,” Christopher replied. The two California Democrats shared a laugh and proceeded to discuss his Middle East mission, but Christopher had made his point more bluntly than all the top Clinton Administration officials who were courting Feinstein.

The direct appeal was followed up the next day with a White House budget briefing for a dozen California business leaders--intended to apply more pressure on Feinstein--and two late-night phone calls to the California senator from President Clinton.

What began last month as a soft-sell turned into a full-court press to win over a wavering Feinstein before today’s Senate showdown on Clinton’s $496-billion deficit-reduction package. Feinstein continues to be so besieged by requests from Administration officials since pledging on Wednesday to support the Clinton package that she has declined to meet with two Cabinet secretaries.

Unlike other senators who publicly extorted specific concessions in exchange for their votes, Feinstein took a different tack. While making known her reservations about the bill, Feinstein said in an interview Thursday, she told Senate Majority Leader George J. Mitchell (D-Me.) that she intended to oppose the budget package unless it contained four separate economic incentives that she believes are needed to help revive California’s ailing economy.

As a freshman legislator, Feinstein was not a member of the House-Senate conference committee that hammered out the budget compromise. But she effectively used the only clout she had--her vote on the final plan--to prod the committee and the Administration to act on some of her requests.

A Clinton Administration official likened Feinstein’s approach to a “delicate dance.” The official, who spoke on condition of anonymity, said: “She kind of distanced herself from the package if it didn’t work out. At the same time, if she votes for it, she can take all the credit if it does work out.”

Feinstein said that while the plan is not perfect, she is satisfied with the outcome.

“When you consider there are 535 (members of Congress) who have to be considered in this thing, I feel good for California (about) the way it’s worked out. I do not believe that this will retard the economy. I believe there is enough in it to improve the economy and, most importantly, we take a major bite out of the budget deficit.”

White House officials said that they focused intensely on Feinstein because every vote counts in the Senate, where Vice President Al Gore had to cast a decisive, tie-breaking vote when the original version was passed in June. Sen. Barbara Boxer (D-Calif.) vowed to vote for the package from the beginning.

Republican officials in California said that Feinstein, who will face reelection next year, was posturing for political purposes because the $241 billion in tax hikes over the next five years are unpopular. They said that Feinstein has sided with Clinton on all major issues and that her vote was never in doubt.

But the White House took Feinstein’s concerns seriously, first scheduling a private meeting with Clinton on July 25 and then flooding her office with calls from Cabinet members and high-level Administration officials.

In the process, Feinstein said, she forged a working relationship with Clinton that should serve her well in dealing with issues of importance to California.

“It is fair to say I have talked more with him in the last two weeks than I have (since January),” Feinstein said. “I recognize by happenstance my vote was needed.”

Throughout the process, Feinstein said, she was careful not to issue threats or dire warnings. “We stated our views in writing early on,” she said. “Nobody could get the mistake that I was coming in at the last minute with a list of things.”

The four programs Feinstein said she wants: permanent tax credits for entrepreneurial firms that engage in research and development, a targeted capital gains tax break of 50% for investment in small businesses that are held for at least five years, elimination of a 10% surtax on capital gains and a $3.5-billion enterprise zone program to stimulate economic growth in hard-hit communities such as South Los Angeles.

Of the four, Feinstein fought hardest for what appeared to be a losing battle to have R&D; tax credits made permanent. It was something Clinton promised in his campaign but retreated from in his scramble for revenues to reduce the deficit.

At one point in the negotiations, it appeared that the credit would be allowed to lapse entirely for 18 months--potentially taking with it such items as 100 new scientist posts at a major California biotechnology firm.

But Feinstein prevailed when the House-Senate conferees, under pressure from the Administration, agreed to extend the tax credit for three years. Senate Finance Committee Chairman Daniel Patrick Moynihan (D-N.Y.) was determined to get the credits for Feinstein.

“In all of Chairman Moynihan’s discussions of this provision in conference, he repeatedly said, ‘I have to get this for Dianne,’ ” said Lawrence F. O’Donnell Jr., chief of staff of the Senate Finance Committee.

Feinstein also was instrumental along with other senators in securing the capital gains tax break, according to two Senate sources familiar with the process. Feinstein and her staff also sought credit for eliminating a 10% surtax on capital gains and winning a federal enterprise zone program--but the two provisions would have been included even if the California senator had not lifted a finger, the sources said.