Clinton lives to fight again on budget bill: Vice-President's casting vote breaks Senate deadlock

TWO DOWN but one to go. Such is the latest progress report on President Bill Clinton's vital budget and deficit-reduction bill after an exhausted Senate approved, by the narrowest possible margin, its version of the legislation shortly after 3am yesterday.

In the end, and despite 48 hours of virtually non-stop lobbying of Democratic waverers by Mr Clinton and top administration officials, it took the casting vote of the Vice-President, Al Gore, to break a 49-49 tie and send the bill into conference. There Senate and House negotiators will attempt to forge a compromise acceptable to both chambers, and which Mr Clinton can sign into law some time later this summer.

The first reaction from the White House was jubilant relief. The Senate, said Mr Clinton, had displayed 'remarkable courage' in the face of 'the same old rhetoric flying at them' from Republican ranks. He predicted the final version would be 'some way superior' to both the House and Senate efforts and enjoy broader support.

That task, though, will not be easy. The package which emerged from the Senate differs from that which won hair's breadth passage from the more liberal Democratic majority in the House four weeks earlier in several key respects. Gone is Mr Clinton's original across-the- board energy tax, replaced by a far narrower transport fuel tax, in essence little more than a 4.3 per cent per gallon tax on petrol.

To help recoup the lost revenue, and maintain the goal of reducing the deficit by around dollars 500bn (pounds 340bn) over the next five years, the Senate has cut into Medicare benefits for the elderly and disabled. Even so, the 44 Senate Republicans were united in their opposition to the last, leaving the fate of the measure - and in effect of Mr Clinton's entire presidency - squarely in the hands of Democrats divided as always between the party's liberal and conservative wings.

The White House was juggling the two factions throughout Thursday evening. But in the event six Democrats broke ranks: three fearful that support for a bill containing a record dollars 200bn of new taxes might doom their re-election prospects in 1994 and three Southern conservatives, including the powerful Sam Nunn of Georgia, who wanted deeper spending cuts.

When the crunch came, however, the imperilled prestige of their party's first presidency in 12 years seems to have been the decisive factor. Just enough Democratic Senators swallowed the misgivings many had voiced from the floor earlier in the day to allow Mr Clinton his triumph. Defeat, moreover, would have eaten into his already tenuous international authority, just a fortnight before his debut on the world stage at the G-7 summit in Tokyo.

But in the process the President's economic strategy has been reshaped. Only four months ago, in the rousing State of the Union address that remains the highwater mark of his young presidency, he laid as much emphasis on 'public investment' as on tax increases and spending cuts.

Since then the Senate has killed his dollars 16bn stimulus package and - goaded by Ross Perot's populist scoldings from the sidelines - increased the share of spending cuts of the deficit package. Compounding his current problems is a hostile black House caucus, whose 38 Democrats are threatening to veto any compromise embracing the welfare cuts contained in the Senate bill.