Budget Deal Remains in Reach, President Says

President Clinton expressed new optimism Thursday that a balanced-budget deal can be completed, and he proposed that negotiators finish their work by agreeing on overall numbers while putting off some thorny policy issues until after the fall elections.

“We should get it done now, and I believe we will get it done in the near future,” Clinton said at a news conference. “And we ought to resolve the policy issues we can resolve and put the ones we can’t to the side.”

Clinton spoke two days after top-level budget talks were suspended and one day after Republican leaders’ pessimistic words helped drive down the stock and bond markets. His hopeful forecast was quickly contradicted by House Speaker Newt Gingrich (R-Ga.), who accused Clinton of trying again to use the topic of Medicare and Medicaid budget reductions--the Democrats’ most potent weapon--against the GOP.

Gingrich said at a news conference in Seattle that Clinton was playing a “political game” by referring to the GOP’s proposals to reduce the projected growth of Medicare and Medicaid spending as “cuts,” when in fact the amount of spending would actually increase steadily.

“I don’t think the president moved the negotiations a step toward a balanced budget today,” said a clearly angry Gingrich.

Clinton said he received a “pretty good response” when he talked to Senate Majority Leader Bob Dole (R-Kan.) about the negotiations earlier in the day. Dole, campaigning in South Carolina for the GOP presidential nomination, said a deal was “possible” but probably “doubtful.”

Gingrich also indicated that he planned to try to pass a series of temporary spending measures to keep the government open until the November elections. The current temporary spending authority runs out on Jan. 26. He also said for the first time that he believes permitting the government to shut down during the budget fight was a mistake.

Amid these contradictory signs about the outlook for a deal, the U.S. stock and bond markets stabilized Thursday after two days of sharp declines, though analysts said nothing on the political front appeared to move investors. The Dow Jones industrial average rose 32.16 points to 5,065.10.

In a 50-minute formal news conference, his first since Aug. 10, Clinton said administration and congressional negotiators are “not that far apart” on dollar figures. Indeed, he said, after 50 hours of face-to-face talks “we are probably warring over less than 2% now.”

And he suggested that while policy issues were the major hurdle, some could be deferred in the interest of quickly producing the balanced budget that has been at the heart of the year’s national policy debate.

He suggested that while the two sides could agree on overall savings from the huge Medicare program over the next seven years, they could put off until later their argument about how to restructure the popular health program for the elderly. He said he would favor some “experiments,” but not a major restructuring “so that it would no longer be a recognizable guarantee for our seniors.”

Clinton said the two sides might defer another stumbling block: the issue of whether to convert Medicaid, the program of health benefits for the poor and disabled, into a system where coverage is not assured.

But he said the negotiators could make “an 80% agreement” on Medicaid because he agreed with the Republican proposals to give states more flexibility to design their own programs.

Clinton said he also favors removing environmental questions from the budget, including whether oil drilling should be permitted in the Arctic National Wildlife Refuge. “Those things are not necessary to balance the budget,” he said.

“We can balance the budget,” he said. “To do that, some of the differences between me and the Congress over some of these issues will have to be taken out of that budget agreement and deferred until the election. But that’s what elections are for.”

Gingrich, speaking shortly after Clinton, said the president had referred to proposed reductions in future Medicare and Medicaid spending as “cuts” eight times during his press conference. In fact, he said, the Republican plan would increase seven-year Medicare and Medicaid spending.

“Why do you call your [numbers] ‘dollar savings’ and characterize ours as cuts?” Gingrich asked.

Gingrich said such rhetoric is “simply misleading” and “factually not true.”

“I don’t know how you have good-faith negotiations when someone does that,” Gingrich said, noting that he, Dole and House Majority Leader Dick Armey (R-Texas) had previously come to the conclusion that “a good understanding was beginning to develop” between Clinton and the Republican congressional leadership.

“And when you have misleading claims, misleading information and misleading offers, it is not helpful in getting this done. And I would say that nothing I saw in this press conference moved me toward any sense of optimism,” Gingrich said.

Gingrich did not address Clinton’s proposal that negotiators should agree on overall numbers but put off the policy debate until after the election. But one leading budget analyst, former Congressional Budget Office Director Robert Reischauer, predicted that Clinton’s suggestion would be a “nonstarter” with Republicans.

He said that going such a route would only allow Clinton to argue later that the public could have the benefits of a balanced budget without the sacrifice of popular but expensive programs such as Medicare.

“This would take the wind out of the Republican sails because they are arguing that you’ve got to have these structural reforms to balance the budget,” he said.

At his press conference, Clinton also:

* Announced that the federal government would give disaster aid to blizzard-struck Maryland and the District of Columbia, and would consider such help for the Eastern states between North Carolina and New York.

* Insisted that the federal government would not default on its debts, even though the Republican Congress has tried to block further raising of the $4.9-trillion debt ceiling to force Clinton’s hand on the budget issue. The Treasury Department is beginning to run out of legally acceptable maneuvers to allow the government to continue to incur debts.

But Clinton said he believes that it would be “wrong and almost inconceivable for the country to default on its debts.”

Times staff writer Edwin Chen contributed to this story.