NEWS ANALYSIS : Battle of the Budget Loses Intensity : Spending: Change in emphasis is tied to last year’s deficit-cutting pact. This year’s titanic struggle is expected to be over health care.

The spending plan President Clinton submitted to Congress Monday incorporates one basic truth--after a dozen years of battle, the budgetary war that began with the election of Ronald Reagan has ended.

Congress, the press and other Washington institutions have become accustomed to thinking of the federal budget as an epic struggle.

Battles over the budget were central to the Reagan Revolution. Budget negotiations in 1990 became one of the defining events of the George Bush presidency, leading Bush to break his “no new taxes” pledge. And last year, many--including the President--said that the entire fate of the Clinton presidency rested on whether Congress would approve his first budget.

This year’s budget, by contrast, is measured not in bold strokes but in increments. It is a zero-sum insider’s game, one that will no doubt provoke furious lobbying from narrow interests and cause bitter squabbles in Congress but one that is unlikely to have a major impact on Clinton’s overall standing.

This year, the titanic struggle will be over health care, not the budget. Absent a sudden, drastic downturn in the economy or the election of a Republican in 1996, the budget--a focus of fevered public attention for more than a decade--seems doomed once more to become the province of accountants and policy analysts.

Two major reasons account for the end of the budget wars.

First, the budget agreement signed in blood by Congress and the White House last year commits to a steady course of deficit reduction, requiring that any new discretionary spending be offset dollar for dollar by reductions in existing programs. Given the public mood, that puts an end to the old budgetary game of cutting with one hand and pumping up with the other.

Now, it is clear to everyone that a dollar given to one constituency or interest group is a dollar that must be openly taken away from another.

The 1995 budget’s major elements tell the story: no new tax proposals, no big new programs, no huge spending cuts but dozens and dozens of small shifts--trimming low-income housing to fund programs for the homeless, cutting mass-transit operating subsidies to increase spending for mass-transit construction, eliminating uranium enrichment funds but increasing money for environmental cleanup.

This year, “we’re not having this contentious fight over the tax issue,” Clinton noted in a speech to a business group in Houston Monday.

Almost certainly, members of Congress will rally to defend some of the 400 or more programs that Clinton has proposed to cut or eliminate.

And many of Clinton’s liberal allies will complain that he has gone too far in ordering cuts. But unlike last year’s budget plan, with its hefty tax increases for upper-income Americans, this one contains no single element that is likely to start a political war.

Moreover, most of those upset over a cut in one part of the budget are likely to be assuaged by an increase elsewhere. At the Children’s Defense Fund, for example, the group’s government affairs director, Sharon Daly, objected that Clinton’s proposals to trim some domestic programs to make room for others amounted to “robbing Peter to pay Paul.” Even so, the group praised Clinton for increasing funds for programs, such as immunizations and Head Start.

The second reason for the relative quiet can be seen in a column of figures released along with the budget--the forecast prepared by Clinton’s economic advisers. The forecast calls for five straight years of steady, albeit unspectacular, economic growth, inflation running at less than 3%, interest rates steady at today’s relatively low levels and joblessness falling slowly but surely toward the full employment level by 1997.

If the forecast proves accurate--and the forecast for this last year was precisely correct--Clinton and members of Congress who stand with him will be able to run for reelection in 1996 claiming economic success. Six months ago, when last year’s budget went to a vote, Clinton’s Republican opponents asserted that it would wreck the economy through high taxes. Nervous Democrats hesitated before voting for it, wondering what they would tell their constituents if the Republicans proved correct.

Today, after six months of good economic news, Clinton has some credibility when he asks members of Congress to stick with the plan. And so long as the economy keeps reviving and the deficit keeps shrinking, Congress has few reasons to reject his request.

Because of that, White House officials believe that they will be able to beat back any attempts by Republicans and conservative Democrats to change the basic fiscal blueprint agreed upon last summer. In the first real test, expected later this month, White House and Senate aides believe the proposed balanced-budget amendment to the Constitution, which last year seemed headed for enactment by Congress, now probably will die.

None of this means that the deficit itself has been eliminated--just that its potency as a political issue has faded substantially. Under Administration forecasts, the deficit, although smaller by far than it might have been, will remain well above $170 billion for the rest of the decade. As a result, the total size of the national debt will also continue to grow.

But if the economy grows, both the deficit and the debt will decline in relative terms. Beginning this year, Administration forecasters expect the national debt to begin declining as a percentage of the total economy for the first time since 1981, when it began its rapid rise.

The deficit is expected to chart a similar trend. When Clinton took office in 1992, the annual gap between federal receipts and spending stood at 4.9% of the national economy. But by 1996, its share will be down to roughly 2.5%, Administration economists predicted. If Congress passes Clinton’s health reform plan, which would reduce federal outlays for Medicare and Medicaid, officials asserted, the deficit would drop below 2% of the gross domestic product by the end of the decade.

The costs of health care remain the major potential flaw in what would otherwise be a highly optimistic forecast for Clinton. “Ninety percent of the increase in spending as we proceed from ’95 through ‘99--90% of the increase--is going to take place essentially in three areas: in health care, in interest payments on the debt and in Social Security,” according to Leon E. Panetta, director of the White House Office of Management and Budget.

While Social Security will become a concern of policy-makers again sometime in the next century, for now, most of the worry centers on health.

The government’s two big health programs, Medicare for the elderly and Medicaid for the poor, now take 19 cents out of every federal dollar. By 1998, 25% of each tax dollar will go to health.

Clinton’s health plan would sharply reduce those costs in two major ways--by cutting the income doctors and hospitals receive from Medicare and by shifting some Medicaid costs onto the private sector through the requirement that all companies pay to insure their workers. Over time, Administration officials argued, their plan would hold down outlays still further by reducing the overall growth of health spending. It is over those issues that the battle lines will now be drawn.