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U.S. SHOWS SURPLUS OVER 12-MONTH PERIOD

In a sign that the federal budget may be balanced long before most people had thought possible, a new Treasury Department report shows that the federal government has run a surplus over a 12-month period for the first time since 1970.

The news is expected to increase pressure on President Clinton and Congress to decide what to do with the looming budget surplus -- to leave it alone or to finance tax cuts or spending increases.

The Washington Post, however, reported today the White House has decided against offering any major proposals to cut or simplify taxes in its forthcoming election-year budget, gambling that it can successfully counter Republican plans by portraying them as regressive and irresponsible.

While producing their own tax simplification formula had political appeal, senior administration officials said they kept coming back to the conclusion that there was no way to do so without increasing taxes on the middle class or derailing the plan to balance the federal budget by 2002.

Clinton tipped his hand during a news conference last week, when he suggested that preserving the progress made in reining in decades of deficit spending was more important than further reducing the tax burden.

"I can't say at this time that I will have anything to say about tax cuts in the State of the Union," he said. "Keep in mind that . . . we have worked so hard to make this country work again. And we need to be looking to the future and our long-term challenges now."

But House Speaker Newt Gingrich, R-Ga., Saturday said that not only should Clinton move to cut taxes further, but he also should submit a budget for the coming year that is in balance, three years earlier than called for under an agreement last summer between the White House and Congress.

Gingrich said in an interview that tax revenues, which are growing faster than anticipated, coupled with selected spending cuts should enable the White House and Congress to find a way to make additional tax cuts and still produce a budget that is in balance.

Republicans hailed the newest Treasury report, which showed a $2.4 billion surplus for the 12 months ending Nov. 30, as a monument to the success of their drive to balance the budget since they took control of Congress in 1995.

"In our first three years, we have been able to pull off something remarkable," said Gingrich. "I think this is a great Christmas present to the American people."

The Clinton administration, while welcoming the news, cautioned that Gingrich's enthusiasm may be premature. The budget, which showed a $21.9 billion deficit for the fiscal year that ended Sept. 30, could easily swing back into the red by the time the current fiscal year ends next Sept. 30.

"It is obviously wonderful news, but we shouldn't read too much into it," said Lawrence Haas, a spokesman for Clinton's Office of Management and Budget. "We have an unusual combination of good economic factors, but prudence would suggest you shouldn't project perfection into the future."

Whether or not the 12-month surplus proves ephemeral, both sides agree that the latest budget report is a milestone in the progress of the federal budget from red to black -- and at a rate much faster than Clinton and Congress expected when they reached an agreement to eliminate the deficit by 2002.

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