Clinton Heralds Drop in Federal Budget Deficit

President Clinton took credit for another drop in the federal budget deficit Monday in a final swing through three Midwestern states, where he mocked GOP opponent Bob Dole’s warnings about voter apathy.

Whirling through a battleground region where polls show he clearly holds the upper hand, Clinton hailed newly released figures showing that the federal budget deficit will close 1996 at $107.3 billion, a decline of 63% from its 1992 level and the lowest figure in 15 years.

“America has heard a lot of calls in the last several days. I would say this proves that America is awake--and moving in the right direction,” Clinton told the crowd in this St. Louis suburb, referring to Dole’s demand that voters “wake up” to the dangers of reelecting the president.

Clinton spoke before the town’s city hall tower, where his campaign had draped a huge banner showing the deficit’s plunge since 1992. Two young people were asked onto the stage to shyly pull a rip cord that released a flap showing how the deficit sagged yet further in the last year.

“This has meant real benefits to the people in this audience,” Clinton said. “The deficit was a ball-and-chain holding back our economy.”

Republican leaders quickly disputed Clinton’s claim of credit for the shrinking deficit, issuing a press release announcing a slightly different figure even before the president spoke on Monday.

Sen. Pete V. Domenici (R-N.M.) and Rep. John R. Kasich (R-Ohio), chairmen of the Senate and House budget committees, said that the GOP led the way to lower deficits and Clinton reluctantly followed.

The lawmakers said the 1996 deficit would be $109 billion and called it “a tribute to the common-sense belt-tightening of the Republican 104th Congress.” They added that the deficit decline “vindicates our willingness to stand up to Bill Clinton and the big-spending Democrats who used to be the majority in Congress.”

Treasury Secretary Robert E. Rubin, however, said that Clinton deserved “at least” 75% of the credit for falling deficits because the 1993 budget he squeezed through Congress consisted of a combination of tax increases and spending cuts.

Since then, financial markets have responded favorably with low interest rates, rising stock prices and consistent, if modest, economic growth.

The deficit figure is the lowest since the 1981 fiscal year. As a percentage of the gross domestic product, the $107.3 billion is the smallest since 1974, White House officials said, adding that it is also the lowest deficit as a fraction of GDP of any of the major industrialized economies.

Franklin D. Raines, director of the Office of Management and Budget, which compiles the figure, said the drop reflected higher tax revenues from stronger-than-expected growth, as well as efforts to restrain federal spending.

“About half is from the increase in economic growth and about half is from holding down spending,” he told reporters in St. Louis.

This year’s unexpectedly large decline in the deficit came because the government collected $26 billion more than anticipated in personal income taxes and $5 billion more than predicted in corporate taxes, Raines said. Also, the government spent $20 billion less than expected, including $12 billion less in spending from the Department of Health and Human Services.

Still, analysts note that the deficit should begin to rise again after 2000 if Congress and the president do not work out an agreement to scale back entitlement spending, an effort potentially fraught with political peril. Raines acknowledged that the administration projects the 1997 deficit at $125 million, a 17% increase over 1996, largely because of projected growth in entitlement spending.

Kim Wallace, an independent analyst at Lehman Bros. investment firm in Washington, said that Clinton deserves “a good bit of credit” for fiscal policies that have helped shrink the deficit. But, he added, the budget deficit--and the U.S. economy--are affected by a vast and varied array of forces, making it impossible to say exactly how much credit Clinton deserves.

“He has shown leadership on fiscal policy, and for that reason he deserves some credit” for cutting the deficit, Wallace said. But it would be “folly” to try to translate Clinton’s role in deficit reduction into precise, numerical terms, he said.

Clinton ignored such distinctions as his feel-good campaign sped through the Midwest on what seemed like a preelection victory lap. His rare direct reference to his opponent appeared intended to characterize Dole as taking out his frustrations on the voters.

As he spoke, Clinton sought to use an appearance by a group of hecklers to underscore his arguments that he has delivered on his promises.

“That’s why they try to shout us down: Because we can show you,” he told his audience, referring to Missouri’s nickname as the ‘Show Me’ State. “You don’t have to listen to the shouting; you can look at the showing.”

Clinton had rushed through the St. Louis, Minneapolis and Chicago areas by nightfall, ending the day in Columbus, Ohio. The travel schedule was set as much by the requests of regional Democratic VIPs concerned about congressional and local races as by Clinton’s own needs, for he leads comfortably in all three states.

By week’s end, Clinton’s schedule calls for him to have traversed the continent. Michael McCurry, the presidential press secretary, said the itinerary was designed to provide “one last summing up” of the president’s themes.

Clinton plans to talk today in Columbus about education. On Wednesday in Michigan he intends to talk about the economy, in particular, women’s prospects.

On Thursday in Phoenix, he is to take up ways to strengthen U.S. families and protect them from crime. On Friday, in Santa Barbara, he plans to discuss the “consensus that he believes Americans are reaching in this election,” McCurry said.

Aides brushed off questions about the opposition’s increasingly blunt attacks on Clinton’s ethics, including Dole’s comments over the weekend that the president’s ethical lapses may bring him down in the next term.

Dole has “been sort of serial flailing as he makes his circuit around California, and it’s increasingly becoming less necessary to respond as the shrillness and the absurdity of the remarks accelerates,” McCurry said.

Times staff writers John M. Broder and Jonathan Peterson in Washington contributed to this story.