
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, May 10, 1990                   TAG: 9005100245
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A1   EDITION: METRO 
SOURCE: Cox News Service
DATELINE: WASHINGTON                                LENGTH: Medium

SUMMIT SET ON DEFICIT

Spurred by bad economic omens, President Bush and Democratic congressional leaders agreed Wednesday to convene a budget summit aimed at cutting spending and raising revenues.

Although it will be weeks, if not months, before any "grand compromise" can be fashioned, officials on both sides said the final package is likely to include:

Further defense cuts from the $295.5 billion level called for in pending legislation. This is a high-priority Democratic aim.

Additional cuts in domestic programs as well as reforms in the annual budget process - along the lines the president sought in his ill-received January budget proposals. This is a White House goal.

An array of new levies, but not a broadly based increase in federal income taxes.

A political non-aggression pact that would ensure both sides subscribe to all aspects of the final agreement and would not seek advantages with the voters in November.

Bush met in the Oval Office for more than an hour with top Senate and House leaders of both parties. Afterward, White House spokesman Marlin Fitzwater said negotiations would begin Tuesday.

"The president and the bipartisan congressional leadership agreed that the special budget group would function best if there were no preconditions for negotiations and if there were no negotiations through the public," Fitzwater said.

Behind the decision to move ahead were gathering signs that the U.S. economy is weakening. That raises the threat that the budget deficit, which Bush had sought to hold below $64 billion for the coming fiscal year, could balloon to as much as $100 billion if revenue fails to meet projections.

The mounting deficit has raised pressure on the Federal Reserve Board - the nation's money managers - to raise interest rates as a means of controlling inflation. But some economists say higher rates could worsen the slump as business activity falls in such interest-sensitive areas as housing and autos.

Participants said the negotiating team will try to slash the projected deficit by about $50 billion. That amount would probably have to be cut under provisions of the Gramm-Rudman-Hollings law if a bipartisan bargain cannot be struck.

by CNB