Balanced budget to be offered New spending plan three years ahead of schedule, Clinton says

Six-year decline in deficit

Pressure to boost spending, cut taxes expected to be strong

January 06, 1998|By Carl M. Cannon | Carl M. Cannon,SUN NATIONAL STAFF

WASHINGTON -- President Clinton announced yesterday that he will send to Capitol Hill next month a federal budget that is in balance for the first time in 30 years -- and three years ahead of schedule.

"That's good news for the American people and for the American economy," Clinton told reporters at the White House. "We reversed 12 years of trickle-down economics in which the deficit of this country exploded year after year and our national debt was quadrupled."

After meeting with his budget advisers, Clinton also said the projected federal deficit for the current fiscal year had been pared to $22 billion -- down sharply from an original estimate of $90 billion when a five-year balanced budget agreement was forged with Congress last summer.

"That means that it will decline for the sixth year in a row, a truly historic event," he said. "We have come a very long way."

The end is not in sight, either. Thanks to tax revenue generated by a humming U.S. economy, Clinton and the Congress are confronting a pleasant problem that no one in this town has faced in three decades: what to do with a surplus of federal tax dollars?

Because this is an election year for Congress, the pressure to boost spending or cut taxes will be strong. The other options are to use the money to bolster the future solvency of Social Security and Medicare, or to do nothing -- and simply apply whatever surplus money exists to trim the $3.8 trillion national debt.

Clinton refused invitations yesterday to speculate about which option he favors, stressing that it was not certain that a balanced budget had yet been achieved.

But the nonpartisan Congressional Budget Office, in a less cautious forecast, predicts that a surplus might even be achieved in the current fiscal year, which ends Sept. 30.

The office's deputy director, Jim Blum, said yesterday that it was "entirely possible" that the government could post a surplus this year if the economy continued to grow, although Blum cautioned: "We're not there yet."

Administration officials -- unsure of the size of any surplus, when it would kick in or whether it would be permanent -- say that plans to spend it are premature.

"You shouldn't start making spending commitments on money that is not even there," said Gene Sperling, Clinton's economic policy adviser.

"That is not a fiscally responsible position to take," he said.

In playing down the tantalizing prospect of a surplus, the president and his advisers are trying to exert some control over the discussion of what to do with newly available money in an election year.

Although most budget experts say the amount of any surplus in the next year or so is likely to be small -- perhaps $20 billion out of a budget of $1.7 trillion -- there are a host of suggestions of where it would be best put to use.

Spend it

After years of enforced austerity as they sought to wrestle the spending monster under control, both political parties have a pent-up desire to spend, and at levels that might exceed whatever surplus eventually is produced.

Sen. Paul Wellstone of Minnesota, for example, expressed the conviction of some liberal Democrats that any surplus should be used to help strengthen social programs for the poor.

"We have to invest in the health and skills and intellect and character of our children, all of our children," Wellstone said Sunday after being asked how a surplus might be used. "If we don't invest now, we pay the price later. High levels of high school dropout, high levels of illiteracy, substance abuse and crime -- I mean, this is the best investment we can make."

And yesterday, House Speaker Newt Gingrich, the Republican leader in Washington, sounded even more ambitious:

"We're on the edge of surpluses in the 80-, 90-, 100-billion-dollar-a-year category, which means that we will have the resources to start looking at saving Social Security and start looking at modernizing defense and science and transportation, to start looking at annual tax cuts," Gingrich said. "The time has really come for talking about a generation of goals.

"What should we do over the next generation?"

But an influential Republican in the Senate, Pete V. Domenici of New Mexico, who chairs the Budget Committee, urged restraint. "We cannot spend our way to balance, and now is not the time to try," Domenici said.

Cut taxes

Treasury Secretary Robert E. Rubin said over the weekend that the president would propose some modest targeted tax relief next month in his budget proposal, including additional tax breaks for working-class Americans to pay for child care and for energy costs.

Some Republicans on Capitol Hill have said their top tax-cutting priority is eliminating the so-called "marriage penalty" in the IRS tax code. Ensuring that married couples pay no more than two equivalent singles would cost an estimated $18 billion a year -- perhaps most or all of the projected surplus for next year.

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