BUDGET BREAKTHROUGH\Clinton offers 7-year balancing plan, clearing way for end to\shutdown.

Byline: Lawrence L. Knutson Associated Press 

President Clinton bowed to months of Republican demands Saturday and offered a new seven-year plan to balance the budget, a concession in White House budget talks that will let the entire government emerge from its three-week shutdown.

Republicans criticized the president's budget proposal as containing too much spending, and claimed it contained tax increases. But Democrats said it would eliminate federal deficits with gentler reductions in important social programs than Republicans want.

"This plan will show that you can balance the budget in seven years and protect Medicare, Medicaid, education and the environment, and provide tax relief to working families," Clinton told reporters as he sat at his Oval Office desk.

"This is a time of great national promise. We need to find unity and common ground," he said.

Both sides said the Congressional Budget Office had certified that the proposal would eliminate federal deficits by 2002. Clinton signed legislation approved Friday by Congress that as a result of that CBO certification will immediately reopen all federal programs that remain shuttered - at least until Jan. 26.

Clinton's embrace of the proposal still left the two sides searching for a deal to balance the budget in seven years by extracting savings from Medicare, Medicaid and other social programs, while also cutting taxes.

The two sides met for about 2-1/2 hours Saturday night, taking about a three-hour break after Clinton presented his plan. White House spokeswoman Lorrie McHugh described the session as productive and said the two sides had "exchanged ideas."

They originally were scheduled to meet again today and Monday, but House Budget Committee Chairman John Kasich, R-Ohio, said the only bipartisan meeting today would be among himself, Senate Budget Committee Chairman Pete Domenici, R-N.M., and White House Chief of Staff Leon Panetta - and then only if a massive snowstorm starting to hit Washington just before midnight Saturday permitted. Another White House bargaining session was scheduled Monday afternoon.

Republicans said Clinton's new plan was crucial because it would help clarify how close to a sweeping budget deal the two sides might be.

"The good news is that at least we're going to have a document on the table" that Republicans can evaluate, Kasich said.

Clinton's decision to propose a balanced-budget plan certified by the Congressional Budget Office represents a retreat for Clinton, who for months had refused to do just that.

The president argued that CBO's economic forecasts are too conservative and that embracing them would therefore require steeper savings than he says are really needed.

But Clinton had been under pressure from many Democrats in Congress to back a plan using CBO figures because they feared Republicans were winning the argument that the president was trying to avoid producing an honest plan to balance the budget. The new package would require deeper cuts from Medicare, Medicaid, welfare and other domestic programs than the last plan Clinton proposed in December.

Nonetheless, White House officials tried to characterize Clinton's newest offer as his latest political victory over Republicans, because it ended the partial federal shutdown. Just Friday, the House GOP reversed itself and allowed the return of furloughed federal workers and the reopening of many agencies without having extracted a new balanced-budget plan from Clinton.

"If you look at the weekend as a whole, Republicans have made a decision to correct a mistake and reopen government, and there was no reason for us to stand in the way," White House economic adviser Gene Sperling told reporters.

Kasich and Domenici said Clinton's proposal, originally written by Senate Minority Leader Tom Daschle, D-S.D., would spend $400 billion to $500 billion more than Republicans have proposed through 2002. They also said it would not do enough to revamp Medicare, welfare and other social programs Republicans want to overhaul.

"Of all the budgets presented, this is the most liberal of all," said Domenici.

According to Democrats, the Clinton plan would cut taxes over seven years by $87 billion, well below the GOP's $240 billion proposal. It would extract savings of $102 billion from Medicare and $52 billion from Medicaid, about half of what Republicans want, plus an additional $295 billion from other domestic programs - about 75 percent of what the GOP has proposed.

Another feature of Clinton's new plan provides that if the economy performs as well as the White House's Office of Management and Budget projects it will, there would be an additional $194 billion for the government to spend over the next seven years. One-third of the extra money would be used for domestic programs Clinton says would spark the economy, one-third for additional tax cuts and one-third for extra deficit reduction.

Clinton signed legislation early Saturday restoring the wages and jobs of 760,000 federal workers who had been caught in the 21-day federal shutdown. But that measure - and a companion bill he also signed Saturday - reopened only some of the programs in the scores of departments and agencies that had been affected by the shutdown.

Under the terms of another measure Congress approved Friday, Clinton's endorsement of a balanced-budget proposal certified by the Congressional Budget Office would let all other affected programs resume functioning through Jan. 26.

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Photo (color) President Clinton talks to reporters after agreeing to use Congressional Budget Office figures to balance the budget in seven years. Associated Press