Deficit delusions.

• Author: Robinson, Robert G., Jr.

Clinton can't take credit for temporary good budget news.

PRESIDENT CLINTON'S crowing over the apparent progress made in reducing the federal deficit since he took office is reaching near thunderous proportions.

"The decline in the deficit, and the first time in 20 years the deficit has gone down for two years in a row," Clinton said in a speech October 24 in Cleveland, where he announced that the deficit was now $203 billion. "If we hadn't passed the deficit reduction plan last year, the deficit would have been off the charts, up here at $305 billion."

A problem with Clinton's conclusion: It isn't true. A wide range of evidence suggests that the deficit's temporary decline--it is scheduled to resume climbing next year--had little to do with the administration's 1993 budget package. That package of $433 billion in deficit reduction over a five-year period wasn't even passed until August 1993, less than two months before the end of fiscal 1993. Thus, it could only have had minimal effect on that year.

Also, most of the spending cuts that made up about half of the so-called deficit reduction were aimed at the "out" years of the five-year period. For the most part, they haven't happened yet. And some decline in the deficit had already been predicted by the Congressional Budget Office in January 1993, a month before Clinton took office.

The truth is that most of the so-called deficit reduction over the past two fiscal years would have happened no matter who was in the White House. Fortunately for Bill Clinton, he was in the right place at the right time.

In January 1993, the CBO projected that the deficit would hit $310 billion at the end of that fiscal year (on September 30) and then drop to $291 billion for 1994. Instead, the deficit dropped to $255 billion in 1993 and $203 billion in 1994. What accounts for the $144 billion decline over the two years?

"The deficit reduction has been generated by a reversal of the earlier cash-flow outlays for the savings and loan bailouts, legislated tax hikes and stronger economic growth," writes economist Mickey Levy of NationsBanc Capital Markets Inc. In a September paper for the Shadow Open Market Committee, a group of monetarist-oriented Federal Reserve watchers, Levy notes that progress in reducing the deficit has been largely "illusory" because the basic structural problems with the budget remain intact.

According to an analysis by Sen. Pete Domenici (N.M.), ranking Republican member of the Senate...