Bush: Ignore My Lips

And forget Sununu too, Bush tells Congress, as he calls a budget summit and hints that it may even talk about -- shhh! -- raising t---

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Fitzwater disavowed the comments by Sununu. Speaking before the chief of staff was officially identified as the source, he even called the tone of the remarks "crazy." Bush himself apologized to House Speaker Thomas Foley by telephone and reassured him that "no preconditions" meant . . . well, no preconditions. So the week ended with negotiations still scheduled to start Tuesday but no one willing to predict success. "It very well could be that the budget summit will putter into nothing," said New York Democratic Congressman Charles Schumer. Similar meetings in 1987 and last year yielded mostly a collection of one-shot gimmicks and minor moves that served less to slash the deficit than to put off the day when something real and painful would have to be done.

On the other hand, Budget Director Richard Darman and, of all people, Sununu, in a less theatrical configuration, appear to have convinced Bush that the day of reckoning can no longer be postponed. To begin with, the economic projections that the Administration used when it drew up Bush's $1.2 trillion budget proposals last winter have turned out to be far too optimistic. (Democrats, who think the phrase "too clever by half" might have been invented to describe Darman, grumble that he should have known that when he made those projections.) Corporate profits have dropped, reducing the federal tax take. Interest rates have gone up, rather than down as predicted, raising the amount the Government must pay on its borrowings. And the rescue of ailing savings and loan associations is running up greater than expected expenses practically by the hour, an estimated $45 billion this year.

To meet the Gramm-Rudman-Hollings Act requirement of a deficit no greater than $74 billion in fiscal 1991, which starts Oct. 1, it had been thought that a cut of $36 billion, in itself a tall order, would be needed. But Darman publicly recalculated last week that a reduction of $60 billion to $100 billion was necessary (depending on whether S&L bailout costs were treated as part of the official budget). If the White House and Congress cannot agree on such a reduction, Gramm-Rudman would force an automatic cut in spending (called a sequester) of that magnitude, divided roughly half and half between military and civilian expenditures but exempting Social Security and many other entitlement programs.

Darman and Sununu had earlier convinced Bush that the nation -- and the Republicans -- could not stand a sequester of $60 billion or more. Says one official: "It would be so draconian that you would be closing VA hospitals, free ((school)) lunches, education assistance, food stamps, as well as a lot of the military. The Democrats would be all over us for shutting down the Government." Darman and Sununu also persuaded Bush that negotiations to avoid such a sequester had to start now. They could not wait until September, the traditional time, because that would be only two months before the congressional elections, and campaigns would be in full swing. As one official put it, "The political flak we've seen develop here in the past 24 hours would be ten times worse in September."

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