Deficit estimate gap shrinks GOP, White House figures closer as budget talks loom

December 02, 1996|By NEW YORK TIMES NEWS SERVICE

WASHINGTON -- The Republican leaders in Congress are reducing their estimate of the growth of the deficit, bringing them much closer to the White House's figures, officials from both sides say, even before the two sides begin budget negotiations in earnest.

The new projection not only reduces the size of the problem facing the White House and Congress but also narrows the differences between them.

The deficit estimates are a critical part of the budget process since they set the baseline from which the two sides will try to negotiate spending cuts to bring the budget into balance by 2002 while still meeting campaign promises to cut taxes.

Last year the Clinton administration's estimate of the deficit in 2002 was $100 billion less than that of Congress. With the new forecast, that difference is expected to be cut in half.

The new forecast will not be completed for another week or two, and it could still change by tens of billions of dollars. But preliminary estimates on Capitol Hill put the Congressional Budget Office's deficit projection, using a comparable set of assumptions about future spending levels, at $150 billion in 2002, a drop of 29 percent from its last forecast.

"The closer the baselines, the easier it is to find bipartisan common ground on a balanced budget plan," said Gene Sperling, an economic adviser to President Clinton. "It's still not a small amount of money, and bridging the differences is still tough, but the picture is moving in the right direction."

Yet Republicans said that while the deficit problem was not so daunting in numerical terms as it was a year ago, it had become only marginally easier to solve in political terms because the areas from which spending will have to be cut remain extremely sensitive.

Moreover, they said, the differences between the two sides will continue to have as much to do with their opposing views of the role of the government as with how many dollars it should spend.

As one top Republican budget aide in Congress said, "It sounds like we're getting to the realm of achieving balance easily, but the policies left to work with are still huge political problems."

The shift in the congressional deficit forecast is driven by an unexpected surge in tax revenue, lower-than-projected increases in Medicare and Medicaid spending, and a healthy economy that helped drive down the deficit this past fiscal year to $107 billion, its lowest level in 15 years.

After accounting for those positive factors, the Congressional Budget Office is reducing -- possibly by as much as one-third -- its previous estimate of a deficit of $212 billion in 2002, the year by which both parties have pledged to balance the budget, officials from both parties said.

The administration's most recent forecast estimated that the deficit, on a comparable basis, would be $109 billion in 2002. The White House is now revising its own projections as well, and administration officials said they expected their revised estimate be $50 billion lower than the Republican figure.

The White House and the Republicans were about $100 billion apart in their deficit projections last year, deepening their disagreements about how much spending had to be cut.

The administration defends its more optimistic forecast as credible and prudent but has agreed that the budget it submits to Congress in February will eliminate the deficit in five years using the more conservative forecast generated by the budget office.

Although the budget office is officially nonpartisan and has generally retained its reputation of independence, Republican leaders have adopted its numbers as their own for negotiating purposes.

In a nod to the promises of bipartisanship by Democrats and Republicans since the elections, the Republicans have agreed for the first time to supply the White House with the economic assumptions underlying the budget office forecast in time for the administration to incorporate it for budget planning.

The budget office is expected to have completed its economic calculations and to share them with the White House in the next several weeks. The budget office is also expected to supply the White House with its final deficit projections before Christmas.

But the Republicans do not plan to present their budget proposal until after the administration has laid out its plans, and serious negotiations between Congress and the White House on eliminating the deficit are unlikely to get under way before then.

Still, both parties said the new budget office forecast would be clear evidence of the progress made in bringing the deficit under control.

Clinton's budget chief, Franklin Raines, said, "We haven't really internalized how significant a change in fiscal policy we've achieved." The forecast, he said, will bring the deficit "into an area where people can contemplate the kinds of decisions that need to be made" for a balanced budget by 2002.

Pub Date: 12/02/96

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