Clinton budget aims at rapid cut in deficit: As US economic recovery continues, Washington avoids any sweeping tax increases

WITH a reinvigorated economy filling his sails, President Bill Clinton yesterday unveiled a 1995 budget proposal that, without any sweeping new tax increases, would reduce the federal deficit to its lowest level in six years.

With an eye on conservatives in his own party as well as the Republican opposition, the President is arguing for cuts in an array of government services, including the elimination of over 100 federal programmes. A portion of the savings, however, would be directed to areas considered as priorities, including job training and research.

As it stands, his budget draft would see next year's annual deficit fall to dollars 176.1bn ( pounds 117.4bn), the narrowest it will have been since a gap of dollars 152.5bn in 1989. This is dollars 126bn less than even the Clinton administration was forecasting a year ago.

The proposal helps give the lie to Republican caricatures of Mr Clinton as a tax-and-spend Democrat. But the President has been forced anyway to stay in line with the controversial budget package passed last year, which demands a dollars 500bn cut in the accumulated federal budget over five years.

The deficit picture has meanwhile been improved considerably by the economic recovery, which appears still to be gathering strength. Last week, the administration recorded an economic growth rate for the last quarter of 1993 of 5.9 per cent, a more than respectable level at any time.

While the presentation of the annual budget by the White House has become an important ritual in Washington's political calendar, sceptics might note that what finally emerges from Congress later this year is certain to look very different. Debate over the budget is likely to be fierce and highly partisan, with Republicans attempting to cut spending still further and liberals defending programmes important to them.

Among the victims in the Clinton draft is a weather forecasting station in Samoa and federal funds for construction of subsidised housing. The President is also attempting to keep defence spending in check, increasing the Pentagon's budget by only about dollars 3bn, not enough to keep up with the effects of inflation. The Pentagon itself is slated to lose part of its workforce.

At the same time, however, increased funds will be switched to programmes most dear to the President. They include pre-school opportunities for poor children, job training, money for super-information technology as well as for programmes aimed at converting defence-related jobs into civilian ones.

Already, however, there have been cries of disappointment from the liberal wing of the Democrat Party, which believes the improved economy and deficit scenario means the President should begin to relax the tourniquet for some social welfare services and infrastructure investment.

'We have gone too far over toward deficit reduction,' Jeff Faux, president of the liberal-leaning Economic Policy Institute in Washington, argued. 'It is time for Clinton to get back to the investment agenda that he talked about during the campaign.'

The only significant new tax in the proposal is designed to help fund the President's proposals for universal health care for Americans, which he hopes Congress will pass before the end of the year. Targeted at smokers, it would increase the tax on a packet of cigarettes from 24 cents to 99 cents. For two- pack-a-day smokers it means paying an extra dollars 550 a year.

Delivering his proposals, the President declared yesterday: 'We have ended drift and broken the gridlock of the past.'