IN what is expected to be one of his first important budgetary signals, President Clinton today must choose how he wants to handle deficit-reduction targets: to revise deferred deficit targets or let them stand and face the prospect of automatic spending cuts down the road.
The choice is the legacy of the 1990 budget deal between Congress and President Bush. For all practical purposes, the pact eliminated fixed deficit caps through the end of the current fiscal year, restoring them in fiscal 1994. The law also gave the president one chance to adjust the ceilings for economic conditions that have developed since last January. Today is the deadline for the decision.
Mr. Clinton's decision is being widely watched as one indicator of how serious he is about cutting the deficit, especially in the face of his team's proposal to spend between $15 billion and $20 billion to help stimulate economic recovery.
Not the least of those watching is the deficit-wary Federal Reserve Board. In Senate confirmation hearings, Treasury Secretary-designate Lloyd Bentsen and Office of Management and Budget director-designate Leon Panetta noted the importance of Fed cooperation in working with the Clinton administration to move the economy forward. Yet some Fed members are said to be concerned that Clinton's stimulus package may lose its modest proportions once Congress finishes with it. Meanwhile, deficit projections for t he current fiscal year range from $300 billion to $327 billion.
Conventional wisdom holds that Clinton would send the strongest anti-deficit signal by allowing the deficit ceilings to kick in without changes; if he elects to revise the ceilings, he would be seen as rendering them meaningless.
Despite this view, Clinton should adjust the ceilings as he sees fit; this will give him the maximum flexibility in fashioning his first full budget. The issue is as much one of accountability of as deficit reduction: Clinton and many of the new members for Congress were elected in part on the strength of their pledges to put the government's fiscal house in order. They need to be given the freest possible hand to make good on those promises in ways that still can respond to the nation's changing needs.