Resilient Clinton juggles the budget to score double coup

President Bill Clinton proposed the United States' first budget surplus in three decades. Mary Dejevsky in Washington says if the sums are correct, the Democrats will have a strong card to play in the next presidential election in 2000.

President Bill Clinton, restored almost to his old, untroubled self, yesterday introduced a federal budget for the next fiscal year that would produce the first balance for 30 years and a projected surplus for the decade to follow.

Drawing a large nought against a prepared dollar sign on a billboard beside his lectern, Mr Clinton said that his budget, for the 1999 fiscal year which begins this October, would ensure a balanced budget "not only next year, but as far as the eye can see".

The budget included $252.6bn (pounds 159bn) for defence and an increase of about 6 per cent for foreign aid. The budget for the current fiscal year, which was passed by Congress last autumn, contained the conservative projection of a balanced budget by 2002.

The new forecast reflects the continuing economic boom in the United States - low inflation, low unemployment, rising incomes and high growth - reported by the President in his State of the Union address last week.

But it also reflects some shrewd political calculation. A large proportion of the money - $65bn dollars over five years, required to offset federal spending in 1999, comes from compensation payments provisionally agreed by the big tobacco companies to compensate for the costs of treating tobacco- related diseases.

That settlement has still not been approved by Congress and it could be eroded as states settle their tobacco claims individually. Mr Clinton has thus given Congress, where there is a Republican majority keen on fiscal discipline, an incentive to approve a tobacco settlement as soon as possible.

Mr Clinton's second political coup is to have undercut the Republicans on their calls for tax cuts, and even fundamental tax reform. Rather than spend any projected budget surplus on reducing taxes, the President is insisting that the priority should be to ensure funding for federal retirement benefits. This answers a continuing anxiety of many middle-aged Americans who fear that the money could run out, or be severely diminished, just as they reach pensionable age.