Some Uses For Windfall Are Studied Closed-Door Meeting Focuses On Fine Print

White House and congressional budget negotiators met Monday and discussed using the $225 billion windfall they found last week to shrink deficits and beef up domestic and defense spending beyond initial plans, participants said.

The closed-door meeting, in the Old Executive Office Building, was aimed at completing the fine print of the budget agreement the negotiators struck on Friday. The plan claims to balance the budget by 2002 while cutting taxes by $135 billion and producing $335 billion in savings.

The talks were described by people on both sides, who spoke only on condition of anonymity. By reducing the size of deficits - especially in the plan’s early years - and boosting spending for some programs, the Clinton administration and Republican leaders will make it easier to round up votes for congressional approval later this year.

The House and Senate budget committees were hoping that as early as the end of the week, they would approve a blueprint of the pact. Republican leaders have set Memorial Day as their target for Congress completing action on that framework, which does not need President Clinton’s signature.

They also want enactment by July 4 of subsequent bills that make actual changes in tax laws and benefit programs. That date is likely to slip. Thirteen separate bills controlling federal agencies’ budgets probably won’t be finished until autumn.

Much of the focus Monday was on the $225 billion in lower-than-expected deficits over the next five years that the nonpartisan Congressional Budget Office suddenly told Republican negotiators about Wednesday evening. Administration officials learned of it the next day.

The extra money really gave bargainers an additional $117 billion more to use than they had expected. That is because when they learned of the $225 billion CBO figure, they dropped their plan to use a $108 billion figure resulting from what had been the White House’s more optimistic assumptions about revenue.

According to budget writers, the additional $117 billion also allowed them to drop a politically explosive plan: They were going to legislate a 0.15 percentage-point reduction in the government’s measure of inflation. That would have saved $24 billion over five years, because the result would have been smaller annual cost-of-living increases in Social Security benefits and in income tax deductions and exemptions.

Of the remaining $93 billion, bargainers are discussing using $67 billion to reduce deficits and $26 billion for extra spending for Medicaid, transportation, children’s health care, the military and other programs.

Although precise details were unavailable, an earlier version of the bipartisan agreement - all but completed before the $225 billion was discovered - would have allowed the deficit to increase in 1998 before finally gliding down to zero in 2002. Bargainers were hoping to avoid that scenario, which raises strong objections from many conservatives.

Participants also said their initial agreement mistakenly left a $4 billion or $5 billion deficit in 2002. Negotiators will eliminate that red ink, probably by erasing some spending increases for that year.