NEWS ANALYSIS : Deficit Reduction Has Forced Change on Clinton : Budget: Nation’s focus on the issue has gutted most of the President’s economic plan. It has also reshaped the political debate.

It was altogether fitting that Ross Perot staged a noontime photo opportunity Thursday at the Capitol just as the Senate was about to vote on the nation’s budget bill. For in truth, the economic plan about to emerge from Congress owes nearly as much to Perot as it does to President Clinton.

The President began the year with a clarion call for fundamental economic change. He proposed a complex package of “public investment” initiatives and new spending proposals, coupled with a deficit-reduction plan heavily dependent on new taxes.

But now, virtually all that is left of Clinton’s original “vision for change” is a grim determination to chop the deficit.

His short-term economic stimulus plan has been defeated, and his long-term agenda for increasing government investment in such things as public works, job training and national service has been gutted.

“When you are tapped out and have to pay your bills, sometimes you have to pass up opportunities for new investments,” said Martha Phillips, executive director of the Concord Coalition, the deficit-reduction group founded by former Sens. Paul E. Tsongas and Warren B. Rudman.

Clinton, who criticized Perot during last year’s campaign for being obsessed by the deficit at the expense of badly needed job-creation programs, now finds himself facing a Congress and a nation that seem to share Perot’s obsession.

After a decade in which politicians and voters merely paid lip service to it, the budget deficit has suddenly and surprisingly achieved critical mass as an issue; for lawmakers, hawkishness on the deficit now seems to be a proxy for honesty and political credibility.

“We should be required to tell the American people the truth, we should be able to say to the American people: ‘We’re being honest with you, we’re paying all the bil” Sen. Bob Kerrey, (D-Neb.) told his fellow senators during a debate typical of the ongoing budget struggle.

David Berenson, director of national tax policy for the Ernst & Young accounting firm in Washington, said there is “much greater focus on deficit reduction than you would have expected last year. But I would not give credit for that to either side of the aisle. I think it has been forced on them by the middle class and that squeaky little guy from Texas.”

An early June poll by the Wall Street Journal and NBC News bears that out: Voters surveyed said they think that despite his perceived flaws, Perot would do a better job of handling the economy than either Clinton or Senate Minority Leader Bob Dole (R-Kan.), the de facto leader of the Republican Party.

And, thanks to his earlier, unsuccessful efforts to win approval for new spending initiatives, Clinton is receiving almost no public credit for being serious about deficit reduction.

Granted, Clinton will still achieve some of his original campaign goals with this budget. Taxes on the rich will go up sharply, and a few of his spending initiatives may survive in reduced form. Yet the overriding emphasis on deficit reduction means that Clinton will be able to offer far less than he hoped to the poor, the jobless, schools, or regions struggling with structural economic change.

The House even gathered the strength Thursday to kill the superconducting super collider project by a stunning 139-vote margin.

So today, the arguments between Republicans and Democrats are over whose deficit plan is more credible and which party can offer the proper mix of tax increases and spending cuts.

The President insists that his plan will achieve $500 billion in deficit reduction over five years. Ultimately the White House says Clinton’s plan will be financed in roughly equal amounts from tax increases and spending cuts.

The Republicans, by contrast, argue that Clinton’s plan offers at most $340 billion in deficit reduction, with at least a 3-to-1 ratio of taxes to spending cuts.

“This is overwhelmingly a tax bill,” said William Niskanen, an analyst at the Cato Institute, a conservative think tank.

Perot said he agrees, arguing that Clinton’s budget won’t really curb the deficit. Critics have plenty of ammunition on that point: The Congressional Budget Office projects that the deficit, after dipping in the mid- and late-1990s, will begin to soar again early in the next century, largely because of the health care and retirement costs the federal government will face in caring for aging baby boomers.

Certainly, the danger exists that the Clinton budget could go the way of the 1990 budget agreement, which raised taxes but did little to reduce the deficit--and ultimately contributed to former President George Bush’s defeat.

But there is one key difference. Conservative Democrats forced Clinton to accept a change in the budget process that will for the first time force Congress to vote each year on spending for entitlement programs such as Medicare and Medicaid.

Until now, those programs were on automatic pilot and continued to grow without any oversight.

Today, such mandatory spending accounts for nearly two-thirds of the budget, and all previous attempts at deficit reduction foundered because they failed to address such entitlements.

“This is very real and very meaningful deficit reduction,” said Robert Reischauer, director of the Congressional Budget Office. “We have a lot further to go, the deficit will rise in the future. But his is a very big step.

“And I think in the next few years people will start to see that the sacrifices they made, as part of the 1990 budget agreement and again as part of this budget, will finally begin to produce smaller deficits.”