'94 deficit slashed by $68 billion

January 28, 1994|By Carl M. Cannon | Carl M. Cannon,Washington Bureau

WASHINGTON -- In news touted by happy Clinton administration officials, congressional budget analysts said yesterday that the final federal budget deficit for the current fiscal year will be $223 billion -- a whopping $68 billion less than they projected last year at this time.

Number crunchers at the Congressional Budget Office estimate that the deficit for the coming fiscal year will be $171 billion. This is $113 billion less than projected last January and suggests that the economy is chugging along nicely.

"There's nothing I like better than delivering good news, and we sure have it today," Treasury Secretary Lloyd Bentsen said yesterday at the White House. "We've been telling people all along that we're getting that deficit down . . . and now we have an independent validation."

The White House also announced that new unemployment insurance claims dropped last week by 56,000 and that new orders for manufactured durable goods increased by 2.2 percent last month, the fifth such increase in a row.

All over town, Democrats rushed into overdrive yesterday to claim credit for the improved outlook.

"We would not be seeing these deficit numbers, we would not be seeing the strength in the economy, were it not for the [president's] economic plan," said Leon E. Panetta, director of the Clinton administration's Office of Management and Budget. "I think it's that simple."

That controversial package, passed by only two votes in the House and in a rare tie-breaker in the Senate last August, reneged on Mr. Clinton's election-year promise to cut middle-class taxes.

Instead, in an effort to cut the projected annual deficits by $500 billion over five years, it raised taxes on upper-income Americans and came close to holding the line on discretionary spending.

"It didn't take any gimmicks," said Mr. Panetta. "It did not take a constitutional amendment. It took, basically, leadership of the president, courage of the president, courage of the Congress, to enact what had to be done, to make the cuts that had to be enacted, to enact the revenue increases that had to be enacted."

The sound of people patting themselves on the back also emanated from Capitol Hill.

"Last year at this time, the economy of this country was not firing on all cylinders, and there was some fear and trepidation that we were slipping back into yet another recession," said Sen. Jim Sasser of Tennessee. "Just reflect back. If we had done nothing last year, if we had passed no deficit-reduction package, does anyone believe that interest rates would be at the level that they are now? Does anyone believe that the deficit would be coming down . . . to the extent that it is?"

Well, actually some people do.

Tom Schatz, president of the Citizens Against Government Waste, made the point that Congressional Budget Office numbers are often wildly off. The revised estimates, in fact, were revised estimates of other CBO numbers.

Mr. Schatz also questioned whether the president's budget plan, which wasn't enacted until August, could really have had much of an effect on the 1993 fiscal year, which ended only two months later.

"This recovery really began in the last part of the Bush administration," he said. "At the end of '92, we see now, things were a lot better off than most voters knew."

Several Republicans also pointed out that while the annual projected deficits are going down, the national debt -- the deficits accumulated over time -- is still growing. In fact, even the rosy Congressional Budget Office outlook still amounts to a whole lot of red ink and adds that much more to the $3.2 trillion national debt.

"I hope we have not become so worn out by budget and fiscal policy debates that the intolerable somehow has become tolerable," said Sen. Pete V. Domenici of New Mexico, the top Republican on the Senate Budget Committee.

Added Bruce Cuthbertson, an aide to Republican budget-cutter Rep. John R. Kasich of Ohio, "It's difficult to see why we should do cartwheels over deficits that are still $170 billion. If you look at the projections, the curve eventually starts to go back up over $200 billion. We have by no means slain the dragon."

Mr. Clinton himself has made this point before -- Mr. Panetta and Mr. Bentsen made it yesterday -- as a way of underscoring the need for health care financing reform.

Medicare and Medicaid are the big budget-busters, and yesterday's Congressional Budget Office projections show that without overhauling the nation's health care system, the deficit will begin rising again at the end of this decade, hitting $365 billion in 10 years.

"The message is simple: With health care reform, we get the deficit headed down. Without it, it shoots straight back up," Mr. Bentsen said.

Despite the huge numbers involved, the reasons for the drop in the deficit are no mystery. They include:

* Low interest rates, which lower the cost to the government of paying interest on the national debt.

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