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

DATE: THURSDAY, January 6, 1994                   TAG: 9402250008
SECTION: EDITORIAL                    PAGE: A12   EDITION: METRO 
SOURCE: 
DATELINE:                                 LENGTH: Medium

PROGRESS AGAINST THE DEFICIT

IN CASE you missed the latest report on the deficit, what with the holidays and all, the news is actually good for once. The annual deficit, it was announced recently, has fallen from more than $300 billion in fiscal 1993 to a projected $190 billion in fiscal 1995.

Economists attribute about half the drop to Clinton's five-year economic plan, which raises revenues (slightly), cuts discretionary programs (a shrinking portion of the budget), and throws up a few (small) roadblocks to slow runaway entitlement spending.

Reducing federal debt helps further reduce the federal debt, in a manner of speaking, because the expectation of less demand on the pools of money available for borrowing has the effect of sending interest rates lower. Lower interest rates in turn spark consumption and capital investment, and a better economy sends more tax revenues to the Treasury - reducing the deficit.

For the short term, the economic-growth factor should continue to count as a plus. Unemployment rates are dropping. Fortune magazine predicts the gross domestic product will expand by 3.3. percent this year, a comfortable rate to say the least.

The deficit's downward trend will probably prove temporary. Much depends on whether the administration's health-care reforms end up saving the kind of money Clinton says they will. If they don't, Medicare and Medicaid alone could bust the budget by the end of this decade. For now, though, the signs of progress on the deficit are unmistakable.

Also becoming clearer is the price of such progress. Clinton's budget to be sent to Congress next month reportedly includes hundreds of cuts in discretionary programs, and elimination of some 100,000 civilian jobs.

That's just fine. Not only will the cuts maintain discipline on the deficit front. They're also needed to help pay for the kinds of "investments" on which President Clinton wants to increase spending - among them: Head Start, educational goals, job training, national service, more police officers, and childhood nutrition and immunization.

But understand that Clinton doesn't have much money at his disposal. A recent congressional study found that discretionary spending in the federal budget was 10.2 percent of gross domestic product in 1974, and 10.7 percent in 1983. By the past fiscal year, however, it had fallen to 8.9 percent. Clinton's five-year plan would lower it to 7 percent. And military costs, still far in excess of what the country needs, eat up more than half the discretionary appropriations.

Notwithstanding George Bush's credentials as a "read-my-lips" Republican - and Clinton's call for greater public investments in the infrastructure, human and physical, of future prosperity - it so happens that discretionary outlays take up less of the federal budget today than under President Bush.

Out-of-control entitlement spending, much of it going to the middle class, remains the major challenge and the biggest target for deficit reducers.

by CNB