Clinton: First, Reduce The Debt

Days from announcing a colossal $1 trillion increase in projected federal surpluses, President Clinton said Thursday that much of the windfall should be spent on reducing the national debt, not big tax cuts.

He revealed few details, other than to confirm that he would propose shielding Medicare's surpluses from any use but debt reduction. But congressional Democrats, lobbyists and others speaking on condition of anonymity have said the 10-year surplus will be projected at about $1.9 trillion – more than double the $746 billion the administration projected in February. The figures exclude Social Security.

Without mentioning names, Mr. Clinton also seemed to take a swipe at likely Republican presidential candidate George W. Bush by warning that it would be "a grave error" to use projected surpluses for big tax cuts because the surpluses could disappear.

"If you spend all this in tax cuts or some other mandated fashion on the front end, and it doesn't materialize, then you will be right back to the deficits, right back in the higher interest rates," he said as he departed the White House for a West Coast trip.

Mr. Clinton said he would reveal details of his new projections, and what he would do with the money, next week.

Democrats said Mr. Clinton will propose using the budget bonanza for faster debt reduction, enhanced Medicare benefits and deeper tax cuts, they say. The cash deluge has been produced by the robust economy.

A deep, long-lasting recession could make the projected surpluses shrink or vanish.

But Treasury Department figures have shown unexpected mountains of federal revenue in recent months, leaving only the precise size of the updated surplus estimates unknown. Both major presidential campaigns have already begun trying to use the new figures to their advantage.

Vice President Al Gore, the presumed Democratic candidate, has used the numbers to justify a torrent of recent spending and tax proposals. These have included a 10-year, $500 billion tax-cut package for childcare, education and other purposes; voluntary, tax-free retirement accounts financed partly by federal payments; and new spending for the environment, health and schools.

Aides to Bush, the Texas governor, have tried using the figures to rebut Democratic arguments that the likely Republican nominee's budget plans are irresponsible. Bush has proposed a $1.3 trillion, 10-year tax cut. He also would allow Social Security recipients to invest part of their payroll taxes that support the program in the stock market.

Bush spokesman Ari Fleischer said the Texan would use extra surpluses for debt reduction and strengthening Social Security, both of which are highly popular with the public.