Deficit Headed to 23-Year Low, Clinton Says

President Clinton said Wednesday that the nation’s buoyant economy is shrinking the federal deficit even faster than expected, bringing this year’s projected shortfall down to a 23-year low of $37 billion.

Clinton attributed the good news partly to his administration’s economic policies but warned the gains could be short-lived if Washington fails to take steps to restructure Medicare and Social Security to accommodate the retirement of baby boomers in the first decades of the 21st century.

“I’m the oldest of the baby boomers,” the 50-year-old Clinton said. “I don’t believe that our generation wants to ask our children to make drastic sacrifices to support us because we wouldn’t take modest steps now . . .”

In a wide-ranging hourlong news conference, Clinton also said he is planning to use his newly granted line-item veto authority to trim special-interest tax breaks from the balanced-budget legislation passed by Congress last week and signed by him Tuesday. “I expect to exercise it,” Clinton said, though he stressed he did not know yet which provisions he would strike.

Under the line-item veto law, passed by the GOP-controlled Congress last year, he has until Monday to act.

As he took questions on an assortment of topics, the president appeared in particularly good spirits. And he clearly was pleased to report the revised deficit projection, which is based largely on a strong economy boosting tax revenue.

The administration’s last official estimate of the 1997 budget deficit, released in February, was $126 billion. However, when the nonpartisan Congressional Budget Office projected in May that the 1997 shortfall would be $67 billion, the White House agreed that the forecast was on target.

The $37-billion projection will be part of the official mid-session budget review, which is expected to be released within the next few weeks, according to White House spokesman Barry Toiv. If the figure holds, it would be the smallest government shortfall since 1974, when the federal deficit was $6 billion.

Clinton stressed that according to administration estimates, the progress in deficit reduction would not have continued if the White House and Congress had not reached the new budget agreement for fiscal 1998, which begins Oct. 1.

“Without the bipartisan balanced budget we just passed, our budget officials estimate the deficit would rise next year, to $50 [billion] to $100 billion, and stay at that level for years to come,” Clinton said. “We now expect not only to reach balance by 2002, but to have a surplus in excess of $20 billion, and be able to maintain that for several years thereafter.”

On the matter of line-item vetoes, administration officials have been poring over a list of 79 tax breaks that are subject to vetoes because they would benefit a limited number of people or companies. These beneficiaries range from producers of fermented “draft” cider to the Big Three automobile makers and pharmaceutical companies developing drugs for rare diseases.

Republicans reserved judgment on Clinton’s planned use of the line-item veto. “He did not give any sufficient clues for us to jump to any conclusion today,” said Ari Fleisher, spokesman for the House Ways and Means Committee, which wrote the tax-cut bill that is part of the balanced-budget package.

However, Fleisher warned that since Clinton aides negotiated with Congress throughout the drafting of the tax bill, striking any provision that was specifically part of their deal would draw Congress’ ire.

“An agreement is an agreement,” Fleisher said.

Clinton, for his part, said he would “bend over backwards” to not stray from the accord in using the line-item veto.

Clinton said Democrats and Republicans must continue to cooperate in order to solve tough issues facing the nation--such as reforming campaign finance laws and overhauling the Medicare and Social Security entitlements for the elderly.

“These past months have been a remarkably fruitful time for bipartisan action in the national interests, and I think we have to continue that work,” Clinton said. But he added: “There are still big challenges and tough decisions that we have to make beyond the balanced budget.”

On the issue of campaign finance abuses--a source of continuing embarrassment for his party since last fall--Clinton reiterated his call for Congress to enact reform legislation this year. But also, as he has in the past, he said he would not curtail his efforts to raise so-called soft money for the Democratic Party--contributions that are not subject to existing limitations--even though he has called for such funds to be made illegal.

“I just think we can’t afford to just lay down our capacity to compete,” Clinton said. “What we really have to do is all agree to live under a new set of rules, which I will happily agree to live under.”

Clinton’s jocular mood was evident several times during the press conference. For instance, when asked how far he planned to go to support his embattled nominee for ambassador to Mexico, ex-Massachusetts Gov. William F. Weld, he joked: “I thought maybe I’d go down to Mexico and jump off those cliffs at Acapulco.”

Taking a more serious tone, he said a White House team was working on trying to persuade the Senate to allow the nomination despite the stringent opposition of Sen. Jesse Helms (R-N.C.), chairman of the Senate Foreign Relations Committee. So far, Helms has stymied the appointment by refusing to schedule a committee hearing on it.

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Balance Sheet

The federal deficit is expected to drop to $37 billion this year.

Federal deficit in billions

1997: $37 billion

Source: U.S. Department of Commerce