Clinton Vows to Defy GOP ‘Blackmail’ on the Budget : Government: He expects an eventual deal, but says it won’t be ‘unilaterally dictated.’

President Clinton, facing a series of Republican spending measures that shred his own agenda from top to bottom, declared Monday that he will not bow to “blackmail” by Congress in the critical last two months of the yearlong battle over the federal budget.

“We are not going to have a unilaterally dictated budget. We are going to have a discussion about it,” Clinton said.

But he acknowledged that, in the end, he will almost certainly reach an accommodation with the GOP on the budget even though the result is likely to be a major weakening of 40 years of Democratic social policy.

“There may be some vetoes first,” Clinton said, but public pressure for action is so great that neither side can afford stalemate. “But blackmail is not the way to do it and I’m not going to be blackmailed,” the President added in remarks at a White House luncheon for a group of reporters.

By “blackmail,” Clinton said, he meant the threat of House Speaker Newt Gingrich (R-Ga.) to block federal borrowing by holding up congressional action to raise the debt ceiling unless a budget deal is struck.

The President denounced the threat as “irresponsible,” warning--as other Administration officials have--that world financial markets could react quickly to any hint of an interruption in federal borrowing--and thus in the government’s payment of its bills. The result could be higher interest rates for the Treasury and damage to the U.S. economy as a whole.

This is the so-called “train wreck” scenario. If budget negotiations with the White House stall and congressional Republicans retaliate by refusing to raise the debt ceiling later this fall, when the Treasury is expected to reach the limit of its present legal authority to borrow money, the government could be forced to stop paying its bills and shut down.

“It’s ultimately self-defeating, and it’s wrong . . . and it’s not necessary,” Clinton said.

As a practical matter, most analysts believe that the consequences of a serious stoppage could be so severe that neither Republicans nor Democrats would dare risk it.

But both sides are engaging in a form of brinkmanship because the political stakes are also high on the various elements of a budget compromise--including welfare reform, changes in Medicare and Medicaid, the environment and a host of other issues.

In the end, Clinton said, he expects agreement to emerge on most of the issues and the train wreck to be avoided:

“Do I believe we will get an agreement? I do. This country is not around here after all these years because we let the trains run off the tracks. It’s around here because people of good faith who have honest differences find principled compromises and common ground. And that’s what I think will happen here. . . .

“I think there’s too much energy in the country saying, ‘Make this country work and move this country forward,’ for us to turn back,” he said.

Meantime, as the final jockeying gets under way, Clinton sought to portray himself as, simultaneously, a moderate leader who shares many of the Republicans’ goals--including a smaller government, lower taxes and a balanced budget--but also as a shield against GOP extremists who would go too far.

“More than any Democrat in recent years, I’ve shown not only a willingness but a desire to make government smaller, less bureaucratic, more entrepreneurial and to target investments while reducing unnecessary spending,” Clinton said.

“We can make this work.”

He even extolled his working relationship with Gingrich, saying that “our personal relationship has basically been candid and cordial. . . . Our private conversations are basically free of political posturing.”

At the same time, while presenting himself as ready to be reasonable about the budget, Clinton fired warning shots of his own--accusing the Republicans of going too far in their plans to cut spending and raise costs on an array of social programs.

“It is true I don’t approve of their plans to deny more children access to a healthy start in school or [put] more old people out of nursing homes,” the President declared in a sample of campaign rhetoric to come, “or walk away from all the lessons we’ve learned in the last 20 years, whether it’s preserving our environment or maintaining some human standards in the way we run these nursing homes.”

During the lunch meeting, Clinton also discussed his own relationship with voters, saying that he believes the level of personal animosity toward him among voters has gone down but that making some enemies is the price of pushing his own agenda.

“I took on a lot of tough issues and I made a lot of people mad,” he said. In particular, he suggested, the decisive reason for Democrats’ losses last November was his successful push for legislation that requires a waiting period for the purchase of handguns and bans certain assault weapons.

And he defended his suggestion last week that voters were in an irritable “funk” last November when they wiped out the Democratic majorities in both houses of Congress, but he insisted that the national mood is turning more positive.

“I think the country is sort of moving into a more positive frame of mind as we see more and more good economic news and as we see more and more evidence that some problems we thought couldn’t be solved, you can actually make progress on them,” Clinton said.

The President shouldered some of the blame for the “anxious,” “negative,” “frustrated” mood that he said gripped the country last November. “I had inadequately fulfilled the first responsibility of the President in terms of the bully pulpit” that the Oval Office offers, he said.

Clinton said he regretted not saying before the last election: “Here’s the change we’re going through, here’s how I think it’s going to come out all right, here’s my vision for it. Let’s do this based on our fundamental values of work and family and responsibility.”

His use of the word “funk” in a conversation with reporters aboard Air Force One last Saturday as he returned from a trip to California reminded some listeners of a speech then-President Jimmy Carter gave saying the country suffered from “malaise”--a suggestion that irritated many voters and plunged Carter into political hot water.

Clinton, while conceding that funk “was no doubt a poor choice of words,” said that his own reputation for buoyance and optimism would make it difficult for critics to take advantage of his own remarks.

“I think it will be difficult to convince people that I am advocating the politics of a national funk,” he said. “It’s so inconsistent with my own outlook toward life and the way we try to do things around here. And so I’m hopeful.

“I am optimistic about the future.”