IT'S MIDDLE-CLASS WARFARE

By Richard Lacayo

JUST BEFORE THE SENATE VOTED last week on its welfare-reform bill, New York's Daniel Moynihan, who had engineered his own revision in 1988, demanded a bit of rare institutional solemnity. Since most of his fellow Democrats would be embracing what he considered a historic betrayal of the poor, the Senators should rise in turn from their desks to announce their votes aloud. But Moynihan was one of the few who bothered to stay at his seat during the voting. Democrats milled around. Republican Senators engaged in a round of celebratory backslapping with the 20 or so House members, including Speaker Newt Gingrich, who made a rare visit to the Senate chamber. Moynihan sat there with the pinched expression of a man watching the old certainties of his party expire without so much as a moment of silence.

And it was a moment worth marking--a clear signal that when it comes to protecting the poor, the party of the New Deal and the Great Society can't and won't do much anymore except trim the rough edges from G.O.P. plans. Though the Republican welfare bill was far harsher than the reform Bill Clinton proposed last year, which envisioned billions of dollars in new spending for job training and child care, the President pronounced the Senate plan acceptable. All but 11 of the 46 Senate Democrats voted for it.

Effectively cutting loose the poor was just part of an effort by the Democrats to remake themselves in the face of a Republican juggernaut that is now racing through Medicare. As they prepare for a bitter battle over that crown jewel of the Great Society, Democrats are determined to refashion themselves as defenders of the middle class against the G.O.P. raiders. It was the foul mood of the middle class that made welfare a losing issue for Democrats. And for the same reason, with pocketbook issues dominating the final weeks of the congressional budget fight, the latest items on the Republican agenda could now play in favor of the Democrats.

Sensing their chance, Democrats are showing an unaccustomed unity. Whether it's Medicare, Medicaid, student loans or the earned-income tax credit, which lets the working poor keep more of their paychecks, the usually fractious Democrats in Congress are arguing in unison that the G.O.P. doesn't just want to balance the budget. Rather, the Republicans want to rob the middle class to pay for a tax cut that will give most of its benefits to people who already have plenty of money.

Meanwhile, on a combined speaking and fund-raising tour last week, Clinton spent most of his time playing up his differences with Republicans on the same issues, always emphasizing the costs to middle-class voters. As a Clinton aide put it, "He's road testing new material.'' Even on Medicaid, the health-care program mostly for the poor that Republicans propose to hand back to the states, Clinton has been warning that the G.O.P. plan threatens government support for long-term care, leaving baby boomers to contend with their parents' nursing-home bills. "I don't think that's right'' is a big applause line.

It could be the Democratic reply line to the G.O.P.'s Medicare reforms sketched out last week by House Speaker Gingrich. Promising to "preserve, protect and strengthen'' the system, he offered a menu of proposals that includes HMOS, personal health-care accounts and a new form of doctor- and hospital-provided coverage. His plan would also raise premiums much faster than anything the Democrats have in mind. Even after outlining it, Republicans didn't have numbers to show how it would achieve $270 billion in savings over seven years. And much of those savings are targeted by Republicans not for the Medicare trust fund but for general government revenues, making them available to offset the G.O.P. tax cut. Senate majority leader Bob Dole's plan, released a day after Gingrich's, does a better job of making the numbers add up by offering both carrots and sticks. Seniors who opt to stay in traditional Medicare would see their out-of-pocket costs go up even more than under the House plan; those who choose less costly options would receive more generous rebates from the government.

Enter the Democrats, carrying (they hope) a silver shield. The President says he can save the system with cuts of just $124 billion, though he too has yet to produce the numbers that get him there. House and Senate Democrats plan cuts of just $90 billion, the sum the Health Care Financing Administration, which oversees the system, says is needed to restore solvency. "We know that if the Republicans would only drop their trickle-down tax breaks, they simply wouldn't need to ravage Medicare," says House minority leader Dick Gephardt.

But Democrats won't have long to make their case. Having seen the talking-to-death that brought down Clinton's health-care reform, Gingrich adroitly withheld his plan until the last minute, then provided only a few days for Democrats to counterattack. When House Republicans wouldn't budge on their insistence that there would be just one day of hearings on the Medicare proposal, Democratic frustrations hit the boiling point. Representative Sam Gibbons of Florida, who was Ways and Means Committee chairman until last year's Republican landslide, called it "a deliberate plot to put their program over before the American public has any chance to understand [it]." After storming out of a meeting with Republicans, Gibbons got into a scuffle with Republican Bill Thomas of California. On Friday, as the Ways and Means Committee met indoors, Democrats staged their own forlorn hearings in the rain outside the Capitol.

If Republicans are nervous that Democrats will score with voters, they aren't showing it yet. The G.O.P. has enough votes in the House, and probably enough in the Senate, to force through their version of Medicare. That could lead to a Clinton veto, which would free each party to go before voters next year and blame the other for failing to shore up the system.

Even if Republicans win the floor vote in Congress, Democrats will try to make them pay at the polls later by telling voters that the G.O.P. plan went too far. For Representative Ray LaHood of Illinois, a Republican freshman, the question is literally whether it will play in Peoria. Television spots blasting his party's proposals are already running in his district. Calls to his office have been divided, he says, between people who are mad at the ads and people who are mad at the Republicans. "There is an understanding that we are going to do something with Medicare,'' says LaHood. "I want the people in my district to understand what this Medicare reform is before signing on to it.''

The student-loan program is another potential weak spot for Republicans. As part of their controversial plan for $10.1 billion in education cuts over seven years, they want parents to pay higher interest rates and to eliminate the six-month grace period students have before they must start repaying loans. Those proposals have become a constant theme in speeches by Clinton and town meetings conducted by Democratic Congressmen. Last week, just days after proposing to make colleges pay an administrative fee on government-backed student loans, Republicans were forced to scale back because of the furor that erupted.

Republicans may also be vulnerable if they fail to deliver on promises to make business share the pain of budget balancing by hitting farm subsidies and corporate welfare. In the House Agriculture Committee, G.O.P. unity broke down, for instance, during an attempt last week to reduce farm-subsidy payments. A bill strongly promoted by chairman Pat Roberts of Kansas was defeated when Democratic opponents were joined by four Republicans from cotton-growing districts where agribusiness has taken in $4.6 billion in agriwelfare over the past 10 years.

Even when Republicans do manage to hit their white-collar allies, they can't help whacking a more vulnerable constituency. The House Ways and Means Committee did approve last week a bill designed by its chairman, Bill Archer, that eliminates some tax breaks for business. But as part of the same package it also proposes to squeeze the earned-income tax credit by $23 billion over seven years. An even bigger cut--$32 billion--is proposed by the Senate Finance Committee.

It's in Republican moves like those that Democrats see their chance to lure the middle class back to their side. But for Clinton it's still one thing to zing the other party, another to mount the barricades. On his road show last week, whenever he mentioned that the Republican tax cut would go disproportionately to rich people, he added that "to be fair, some of [them] haven't asked for it.'' (A prudent qualification, given that each night he was raising millions of dollars at party fund raisers from well-off contributors.) The line that came to him most naturally was that he and the majority in Congress have been searching for "common ground'' that extremists want to abandon.

What he means is a place somewhere between Jesse Helms and Jesse Jackson. Exactly where that might be is something the Democrats won't know for sure until they see how their latest reincarnation is playing with voters. When Moynihan was lamenting the welfare bill before the Senate, he said he had "no idea how profoundly what used to be known as liberalism was shaken by the last election.'' The battle for the middle class will shake it to its roots.

--Reported by Nina Burleigh, James Carney and Karen Tumulty/Washington and J.F.O. McAllister with Clinton

With reporting by NINA BURLEIGH, JAMES CARNEY AND KAREN TUMULTY/WASHINGTON AND J.F.O. MCALLISTER WITH CLINTON