BUDGET-BALANCERS are giving one and a half cheers for President Clinton's newest plans to cut the federal deficit.
Paul Volcker, former chairman of the Federal Reserve System, was among a bipartisan group of economists, academics, and government officials this week who praised Mr. Clinton, but also expressed reservations about his five-year budget plan.
Mr. Volcker says the president deserves credit for his budget proposals, which would trim federal deficits over the next five years by an estimated $500 billion. The program should get "wide support," he says.
Yet the president's plan is only a beginning, according to Volcker and other experts. Even though it lowers the deficit significantly, it is "only a good start," not the final solution, says Fred Bergsten, chairman of the Competitiveness Policy Council. By the late 1990s, deficits will begin rising again, unless there are further tax increases or spending cuts.
Dr. Bergsten, Volcker, and more than a dozen other experts held an all-day forum on the deficit Tuesday under the umbrella of the newly formed, 75,000-member Concord Coalition.
Founded by former Sen. Warren Rudman (R) of New Hampshire, former Sen. Paul Tsongas (D) of Massachusetts, and Peter Peterson, a former secretary of commerce, the Concord Coalition is dedicated to one major goal: balancing the federal budget.
Coalition members warn that deeper and deeper budget deficits during the past three decades had a corrosive effect on the American economy and have darkened the economic future for the next generation of Americans.
Today, the impact of the deficit is felt by virtually every family in the United States. The deficit, which is estimated at $320 billion this year, drains savings from the private sector, makes it harder for businesses to raise investment capital, and slows the creation of new jobs. Years of deficits have cut investment in training, equipment, and new factories.
Volcker notes that net business investment per capita in the US, because of the deficits, has slumped to only half the level in Germany, and only one-fourth to one-third the level in Japan.
"We have become a high-consumption, low-savings country," Volcker says.
The result: productivity, which expanded by 2 percent to 2.5 percent annually during the 1950s and 1960s, has slowed to 1 percent growth a year in the 1980s and 1990s.
To prop up its economy, the US borrowed an estimated $1 trillion abroad during the past 10 years, and risked losing control of its economic destiny.
Bergsten notes the heavy cost. If the US had invested in the 1980s as it did in the 1950s, today the typical American family would have one-third more income - $40,000 a year instead of $30,000 a year.
A difference of only 1 percent to 1.5 percent growth each year in productivity is "absolutely critical" to American living standards, Bergsten says.
What's to be done? Ideas flowed at the coalition forum. But central to them all was one theme: The federal budget should be steadily brought into balance in the next five to eight years.
Slashing the deficit will free up trillions of dollars in private capital to invest in new jobs. Living standards will again begin to rise. And America will become much more competitive at the onset of the 21st century.
Senator Tsongas had seven specific recommendations of his own that go beyond the Clinton budget. They include ideas to raise taxes, to cut spending, and to stimulate the growth of private business:
* Double the cigarette tax to 48 cents a pack, and double the excise tax on all forms of alcohol.
* Eliminate two big federal spending projects: the space station and the superconducting supercollider in Texas.
* Limit cost-of-living allowances for entitlements such as Social Security to inflation, minus 1 percent.
* Immediately begin increasing the eligible age for Social Security benefits from 65 to 67.
* Require persons with incomes over $60,000 a year to pay more of their own expenses under the Medicare program.
* Ease government regulations and encourage banks to increase lending to private businesses that are trying to expand.
* Find ways to boost the flow of equity capital to the industrial sector, preferably by reducing capital-gains taxes to zero on long-term investments in securities.
The most important target of financial experts here was health care, including Medicaid and Medicare, the fastest growing parts of the budget. Increases in medical costs are wiping out savings from cutbacks in defense, agriculture, and other programs.
For that reason, coalition members agree that Hillary Rodham Clinton's drive to overhaul the US health-care system will be pivotal to every other effort to balance the budget by the year 2000.
Some of the recommendations of coalition members are clearly controversial. As Tsongas says, unlike current politicians, he doesn't have to worry about appeasing voters. A proposal like his to hold down the increase in Social Security benefits, for example, is considered such a hot topic that it was dubbed here "the third rail of American politics." Touch it, and a politician could end his career.
But Senator Rudman, Tsongas, and others say it is up to the people who see the deficit dangers to push Congress and the president to make tough, controversial decisions.
As Mr. Peterson explained, the role of the informed citizen is "making it safe for politicians to do the right thing."