White House cuts deficit estimate Admission made under GOP pressure, may threaten Clinton's tax plans

July 16, 1993|By Carl M. Cannon and Karen Hosler | Carl M. Cannon and Karen Hosler,Washington Bureau

WASHINGTON -- White House officials grudgingly acknowledged yesterday that the federal budget deficit this year will be far below the estimates used when President Clinton began asking Congress for a series of controversial tax increases.

The revelation, which came on the same day that Congress formally began work on a budget compromise, appeared to put a key element of the president's economic package in jeopardy.

The most vulnerable part of that package -- which barely passed each house of Congress -- has always been the president's proposed energy tax, which would be borne largely by the middle class.

Mr. Clinton who promised to cut, not increase, middle-class taxes when he ran for president last year, has said repeatedly that this tax increase was necessitated by huge upward revisions in the size of the annual budget deficit.

When Mr. Clinton unveiled his economic package in February, the administration predicted that the deficit would hit a record $319 billion for the current fiscal year. Instead, officials estimated yesterday that the 1993 deficit would be $285 billion, lower than last year's $290 billion.

Budget Director Leon E. Panetta said the rosier deficit forecast was due to lower-than-expected costs associated with the savings and loan cleanup and historically low interest rates, which have reduced the expense of financing the federal debt.

The administration released the new figures only after Republicans charged that the White House was deliberately withholding the information, which it was required by law to disclose yesterday.

"It may very well be that if we had those numbers, we might tax the American people less," said Sen. Pete V. Domenici of New Mexico, the senior Republican on the Senate Budget Committee.

Mr. Domenici and other Republican leaders also questioned why the administration was refusing to send to Congress the required midyear budget report -- which they said might show that the deficit has already declined even more, perhaps as much as $50 billion.

In a hectic damage-control effort, Mr. Panetta and Deputy Treasury Secretary Roger C. Altman convened a raucous briefing in a White House office and told reporters they were "shocked" and "astonished" that Mr. Domenici would find solace in a budget deficit still in excess of $250 billion a year.

Moreover, they insisted that this year's savings are mostly a one-time deal, and that the projections for the 1994 deficit would go right back above $300 billion.

Deficit 'excuse'

"It strikes me as strange that Republicans would say $285 billion is an excuse for doing nothing," said Mr. Panetta. "The Republicans have not only lost their direction, but they've lost their spine."

More than 200 lawmakers -- one-third of Congress -- convened yesterday morning in a joint House-Senate conference committee on Mr. Clinton's budget. The panel is hoping to come up with a compromise plan of tax increases and spending cuts that pleases House liberals and Senate conservatives in the Democratic Party, while still managing to achieve the $500 billion in deficit reduction that the White House has set as a magic number.

Republicans, who have unanimously opposed the Clinton plan, clearly believed yesterday that the new deficit figures bolstered their argument that spending cuts alone are enough.

"We may still have time to convince enough Democrats in Congress that a record tax increase is the last thing the American people and the American economy need right now," said the Senate Republican leader, Bob Dole of Kansas.

The new deficit figures could give impetus to a Democratic proposal to eliminate any form of energy tax and replace it with a higher tax on corporations.

Mr. Clinton referred to the deficit figures only in passing yesterday. He was asked during a Capitol Hill news conference how the government would finance emergency aid for victims of the Midwestern floods.

"I think it is almost universally acknowledged now that even though we don't have the specific figure, this year's deficit will be quite a bit lower than it was estimated to be," Mr. Clinton said. "Because we've been working so hard at reducing the deficit, interest rates are down and therefore the cost of servicing our debt is down. So, I think we can handle this."

His comments reflected a prediction that Sen. Bob Packwood, an Oregon Republican, made earlier in the day about what would happen to any savings resulting from lower deficit projections.

"We will spend it," said Mr. Packwood, who has been arguing all year that the government is incapable of truly tightening its belt.

A fight about 'credit'

Mr. Domenici, noting that the president was, in effect, taking credit for the impact of his budget before it is even passed, said, "This is all about [who gets] credit."

The New Mexico Republican asserted that George Bush and the 1990 budget agreement are actually responsible for progress on the deficit.

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