THE FEDERAL BUDGET : Clinton’s Ax Over Federal Agencies Remains Poised for Another Year : Deficit: The fiscal 1996 plan actually boosts some budgets for now. Energy secretary explains you ‘have to spend money to save money.’

The Energy Department, not long ago seen by budget cutters as a possible target for out-right elimination, is now asking for a spending increase.

Energy Secretary Hazel O’Leary, arguing that it costs money to save money, said Monday that a budget boost in the coming fiscal year is necessary to provide a launching pad for what she insisted will still be the deepest cuts of any federal department over the following five years.

The Department of Housing and Urban Development, another agency on which President Clinton has shone the budget-cutting spotlight, is asking for a slight spending increase: Small savings from consolidating some programs would be washed away by increases elsewhere.

In fact, of the agencies that Clinton targeted for cuts over the next five years to create a “leaner” government, only the Transportation Department would undergo significant reductions in fiscal 1996. Proposed trims in spending for highways, transit systems and airport construction enable the Administration to ask for $2.3 billion, or about 5%, less than Congress provided for this year.

“There’s not a lot of specific pain here,” said John White, a budget policy analyst at the Brookings Institute, a Washington think tank. “You don’t have huge savings over the first year because they’re not simply abolishing programs straight out.”

For the most part, the five-year plan for cuts that the White House has been touting for weeks would not result in savings until after the first year.

“It’s a gradual ratcheting down that gets deeper in each passing year,” said Robert Greenstein, executive director of the Center on Budget and Policy Priorities, a Washington research institute. “It’s a reasonable way to go. The current level of the deficit is not doing large damage.”

Congressional Republicans, who now hold the purse strings, have a very different attitude. They want to cut much deeper and are considering going after entitlements, such as food stamps, Medicaid, Aid to Families With Dependent Children. The mandatory programs expand automatically as the number of eligible people increases.

Clinton’s budget proposal, in contrast, does not touch the entitlement side of the budget, and it gives Congress broad leeway for determining, and taking responsibility, for cuts.

Clinton’s budget outlines $26 billion in savings that he plans to achieve over five years through consolidating programs in some departments and turning some government operations over to private interests. His budget calls for an additional $80.5 billion over five years but requires that Congress decide where to make the cuts.

As far as specified cuts are concerned, the Energy Department would bear the biggest burden, but even in that department the reductions in this budget are far from drastic.

During a press conference Monday, O’Leary hoisted a huge visual aid: a check made out to taxpayers for $14.1 billion, which corresponds to reductions in spending that her department plans to make over five years compared to the projected spending based on Bush Administration budgets.

“This is a big number,” she said.

O’Leary outlined plans to reduce spending by cutting back a program that cleans nuclear weapon test sites, by reducing some research and development grants and by turning over some functions to private business. However, she stressed that the cuts could come only after some investment of funds.

“The truth is you sometimes have to spend money to save money,” O’Leary said, defending her department’s request for a $300-million increase for fiscal 1996 over the budgeted amount for 1995.

She said that reducing the size of the departmental operation is expensive because of severance pay and other one-time costs. She also said that some of the operations that the government hopes to sell off will need to be brought up to snuff to make them attractive to buyers.

“Fiscal year 1996 will be a transition year to build a platform to drive down costs and deliver what the taxpayers, the President and the Congress demand,” she said.

Her comments showed how far the Administration has moved since late last year when White House officials were debating whether to abolish a whole department--either Energy, Transportation or Housing and Urban Development--to show taxpayers that the President was serious about cutting government.

At HUD, the Administration proposes cutting $800 million over five years by consolidating 60 programs into three broad funds that would give block grants to states and localities. The department, however, requested a $100-million increase in its $25.6-billion 1996 budget.

Tucked into the budget were about 100 proposals for increases for the Clinton Administration’s priority programs.

“A lot of what is happening here is that they’re shuffling the decks,” said Daniel Mitchell, an economist at the conservative Heritage Foundation.

Some of the biggest beneficiaries include the nutrition program for women, infants and children. It would gain $347 million from 1995 to 1996. Head Start would gain $400 million and the President’s national service program would gain $290 million.

Crime reduction programs would be boosted by $1.3 billion and Goals 2000, the President’s program to encourage the adoption of national academic standards for children at elementary and secondary schools, would receive an additional $347 million.

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The Untouchables

The federal budget is divided between discretionary and mandatory spending.

DISCRETIONARY

Can be adjusted from year to year in annual spending bills.

* Domestic programs

* Military

* Foreign aid

35% of total budget

MANDATORY

Changes require amendments to basic laws.

* Debt interest

* Medicare/Medicaid

* Social Security

* Welfare, food stamps, other entitlements

65% of total budget

Source: Office of Budget and Management