Clinton, Congress on a Fiscal Collision Course : Budget: Neither seems ready to compromise on GOP-crafted spending bills. It may force the closure of critical services by the end of the year.

Slowly but certainly, President Clinton and the Republican-led Congress are heading for clashes over spending priorities that some analysts fear could end up forcing the government to shut down critical services by the end of the year.

On orders from the Justice Department, federal agencies ranging from the Park Service to the Pentagon have begun forming plans--for use in the event the dispute is not settled--to close down all operations except those deemed essential.

Although some analysts say they believe that the two sides ultimately will not allow the government to cease functioning for more than a few days, there is no sign yet they are ready to compromise.

Sen. Bob Packwood (R-Ore.), chairman of the Senate Finance Committee, calls the standoff “a gigantic game of chicken” that may not be resolved without a dramatic convulsion on Wall Street or some other real-world jolt.

Charles L. Schultze, budget director during the Lyndon B. Johnson Administration and later chairman of the Council of Economic Advisers, agrees. “I think there’s a possibility of a lot of trouble.”

The scare talk has been set off by a stalemate between the White House and Congress on GOP-crafted spending bills to scale back programs affecting areas such as education, welfare and child nutrition.

Clinton has threatened to veto several of the GOP bills. He is also expected to reject a separate reconciliation measure Congress must push through to square its appropriation bills with congressional budget targets.

Finally, some Republicans have warned that if Clinton wins those fights, they will try to renew the battle by tacking their spending cuts onto a bill to raise the ceiling on the national debt, which the government must approve to continue operating.

If Clinton were to veto the debt-ceiling bill, the government would quickly run out of money and would have to shut down most of its operations. Eventually, it might have to renege on paying interest on bonds and notes.

To be sure, such Perils-of-Pauline fiscal scenarios are not new in the nation’s capital. Both parties have adopted such tactics over the years.

A similar impasse in 1990 forced President George Bush to close many government services. The Park Service shut down the Washington Monument, for example, and the public suddenly began to pay attention. The two sides quickly compromised.

But Carol Wait, director of the Committee for a Responsible Federal Budget, a nonpartisan budget-monitoring group, says the standoff may prove more difficult to resolve this time.

For one thing, the stakes are far higher than in previous years. The cuts Republicans are seeking would pare $18.3 billion from domestic programs in fiscal 1997 and $43.5 billion in fiscal 1998--major hits by any standard.

For another, the President is urging lawmakers to spend more, rather than less--contrary to what chief executives have argued in previous fights. It’s a tenuous position in today’s budget-cutting atmosphere.

“The more I think about this, it’s hard to visualize how the President can force Congress to spend more money than it wants to these days,” Wait said. “It’s a huge difference from the situations we’ve had before.”

The battle resumes this week, when lawmakers return from their August recess. The first item on the congressional agenda is to complete work on the last of 13 major appropriation bills in the two houses.

Later this month, Congress is to take up the reconciliation bill, which seeks to rejuggle the 13 appropriation bills to bring them into line with budget targets set last spring.

Finally, the debt-ceiling bill must come up by mid-November, or the government’s borrowing authority will expire and the Administration will have to begin shutting down services.

What makes the skirmishing so uncertain is that neither the White House nor the GOP-controlled Congress appears to have the upper hand.

Republicans clearly hold the advantage in the battle over the appropriation bills because it is the GOP majority that will craft them and pass them.

Although Clinton is likely to veto three or four of the 13 bills--and the Republicans may not have enough votes to override him--they probably can push most cuts through anyway by making a few symbolic concessions.

In any case, the lawmakers can easily avoid crippling disruptions simply by passing “continuing resolutions”--stopgap spending bills that authorize continued operations of the government until the real bills are passed. That approach would put the President in a bind, says Robert D. Reischauer, former director of the Congressional Budget Office and now a budget analyst at the Brookings Institution think tank.

“If Clinton vetoes the continuing resolutions, he will be responsible for shutting down the government,” Reischauer said. “If he signs, he’ll have lost a key fight.

“I don’t really think the President holds many cards in this game,” he said.

To some analysts, perhaps the most convenient way to resolve the spat, at least in the short run, would be for Clinton to veto the reconciliation bill, leaving the revised appropriation bills essentially intact.

As Reischauer points out, both sides then would be able to claim victory: Clinton for defending social programs and the Republicans for having tried to cut more.

But even here, any political gains might well be upset in the battle over the debt-ceiling bill, which threatens to embroil both sides in dangerous political brinkmanship that could force the government to shut down.

Analysts warn that if the shutdown continues too long, the government will be unable to make interest payments due in November, setting off a major jolt in financial markets that undoubtedly would hurt the economy.

Administration officials say they plan to launch negotiations with Republicans quickly, trying to get them to roll back some of their planned cuts in spending for social programs.

Clinton’s budget director, Alice Rivlin, says she does not believe that the Republicans would force a shutdown because “the public would be very unhappy about it” and demand that they hold back.

But the Republicans are showing no signs of relenting. “I don’t have any desire to close the government down just for the amusement of it,” House Speaker Newt Gingrich (R-Ga.) said recently.

“On the other hand,” he added, “we’re not going to end up giving the President everything he wants.”

If anything, the impasse is likely to be heightened by higher political concerns. Senate Majority Leader Bob Dole (R-Kan.) is vying for support in his presidential race partly by seeking votes from fiscal conservatives.

And with Dole and Gingrich competing for dominance on Capitol Hill, the budget fight is a major element in the push for recognition.

Even so, Schultze and others are relatively sanguine about whether the situation will produce a fiscal train wreck, because reality will prevail.

“Catastrophe is not going to happen,” Schultze said. “The question is, who’s going to blink first? It won’t be catastrophic at all, but how much discombobulation is going to go on?”