America finally agrees on its budget

Both sides claim victory and seek to tackle long term deficit, reports Rupert Cornwell in Washington

Seven months and two partial government shutdowns late, Republicans and Democrats have finally agreed a 1996 federal budget, and are sending signals that even in this rancorous pre-election period a longer term balanced budget deal may not after all be out of reach.

Of itself, the spending package agreed on Wednesday evening by White House and Congressional negotiators and which President Bill Clinton will sign as soon as the Senate and House of Representatives have given their approval, does not tackle the root cause of the perennial United States budget deficit - the self-enlarging, seemingly unstoppable "entitlement" programmes of Medicare, Medicaid and welfare.

But a succession of scaled back, stopgap bills since the original missed deadline of 1 October 1995, has perforce reduced the deficit, which is expected to drop to around $140bn (pounds 93bn) this year. That figure, the lowest since 1982, represents barely 2 per cent of Gross Domestic Product, by international standards an eminently respectable performance for which both parties were claiming victory.

For John Kasich, the Republican chairman of the House budget committee and often mentioned as a possible vice-presidential running mate for Senator Bob Dole this autumn, the deal saved $30bn of spending and "should be celebrated as the biggest downsizing of Washington since World War Two". But the White House could not hide its own satisfaction, insisting that it had fended off truly draconian cuts sought by Republicans and scored major victories on environmental and social programmes.

In purely political terms, the undisputed winner of the budget battle of 1996 has been Mr Clinton, who positioned himself throughout as a rampart of reason and moderation against the "extremist" Congress of Speaker Newt Gingrich (and by extension Mr Dole). The government shutdowns in particular rebounded against the Republicans, reminding ordinary Americans that the "Big Government" they were supposed to despise actually rendered many valuable, even indispensable services.

But if one battle is settled, others are about to open. First and foremost are negotiations for a 1997 budget, due to be completed in just five months' time, but which as the election draws closer may well prove even more gruelling than those belatedly completed this week.

Hence the fresh talk of a balanced budget deal. The notion began almost in jest, a challenge casually thrown down by Mr Dole for one-on-one discussions between himself and the President. But the White House instantly accepted, leaving Mr Dole to ponder his next move.

The calculation is delicate. Both sides are committed to balancing the budget by 2002, and the plans they have proposed are not that different. Mr Dole's problem is that to strike an agreement would allow the President to claim a victory. But it would also show that he can live up to his constant campaign promise of being a man who "gets things done". And as he trails Mr Clinton by 15 points in the polls and mutiny starts to rumble in Republican ranks, few gambles can do much harm.