BUDGET DEAL'S IMPACT SWEEPING : DEBT CONTROL WOULD AID BABY BOOMERS.

Byline: R.A. Zaldivar Knight-Ridder Tribune News Wire

The 1997 balanced-budget deal reached Friday by President Clinton and GOP congressional leaders would affect nearly all Americans, from the uninsured children of the working poor to retirees covered by Medicare; from college students borrowing to stay in school to successful business owners hoping to pass their wealth on to their grandchildren.

If the deficit is actually eliminated by 2002, everyone would gain. Less borrowing by the federal government helps keep interest rates down for consumers. And controlling government debt would put the country on better footing to support the baby boom generation in retirement.

Previous budget deals carried the stamp of the old Democratic Congress; tax cuts give this one a GOP flavor. Investors can expect a cut in taxes on capital gains, a move sought for years by Wall Street and conservatives.

Middle-class families with children at home and students in college would also get a break.

``Republicans have something going for them in this package, and that is the tax cut,'' said economist Robert Reischauer, a former CBO director.

Programs for the elderly would still dominate the federal budget, but priorities would shift slightly toward younger generations.

The deal would hold down the growth of Medicare payments to hospitals, health plans and other service providers, stabilizing the Medicare hospital fund through 2007. For beneficiaries, the $42.50 monthly Part B premium for doctor visits would rise by about $1 a month over seven years.

Projected increases in Medicare spending would be reduced by $115 billion over five years, but fundamental reforms would still be needed to preserve Medicare for baby boomer retirees.

Programs for the poor were mostly spared heavy cuts, making it easier for liberals to support the deal. The agreement would restore welfare benefits for disabled legal immigrants, which were cut in last year's reform bill. That would include benefits for many elderly immigrants.

Businesses that hire people on welfare will get a tax break. Cuts in food stamps would also be eased.

But the budget is by no means final. Congressional committees will have to fill out the details, and lawmakers and interest groups will vie to put their stamp on it. Major conflicts could arise in the coming months, particularly over tax cuts.

``This deal only opens the way for scores and scores of deals that have to be made later on,'' said an administration official.

Here's a look at some of the big pieces:

Tax cuts

Republicans had sought $200 billion over five years in tax cuts, compared to $100 billion offered by Clinton. The compromise was a gross tax cut of $135 billion over five years. That will be offset by $50 billion in tax-loophole closings and other revenue raisers.

Under the deal, tax cuts would cost the Treasury no more than $250 billion over 10 years.

Congressional aides said five elements will be in the final bill that goes to the president: a capital-gains tax cut, estate tax relief, a child tax credit, college tax breaks and expanded Individual Retirement Accounts.

The White House said Clinton's higher education tax breaks are expected to be in the final package, including the $1,500 ``America's Hope'' tax credit for the first two years' tuition, and a $10,000 tuition deduction for subsequent years.

Also look for Republican ideas, such as restoring the tax deductibility of college loan interest, and allowing penalty-free IRA withdrawals for tuition.

As much as 75 percent of the tax cuts' benefits will go to middle-class families, the White House said, but capital-gains and estate tax relief will largely benefit upper-income people.

Capital gains are profits from the sale of stocks, mutual funds, and other investments. Though more middle-class people own stock than ever before, wealthy people have much more investment income. The estate tax agreement would double the amount that can be passed on to heirs tax-free, from $600,000 to $1.2 million.

Middle-class families would get a $500-per-child tax credit, but it's still unclear at what income levels and children's ages the break would apply.

Some corporate tax breaks face repeal. And the tax on airline tickets, due to lapse again this year, will be extended.

Health care

The deal calls for expanding health insurance to 5 million uninsured kids, about half the children not now covered.

A plan to set a spending limit on the Medicaid health program for the poor, opposed by governors, was shelved.

Groups representing the elderly wanted to see Medicare's fiscal problems addressed, but they were also hoping for improvements in benefits. Many of those improvements came through.

Preventive services like mammograms, diabetes testing and colorectal screening will now be covered in traditional Medicare, but a Clinton proposal to provide respite care for families of Alzheimer's patients was apparently dropped. However, more low-income retirees will get help paying their Part B premiums.