GOP TENDERS DEBT-LIMIT DEAL.

Byline: Adam Clymer The New York Times

Congressional Republicans said Wednesday that they would abandon the national debt as a weapon against President Clinton if he would support modest budget and tax cuts as a "down payment" on a balanced budget.

President Clinton welcomed their proposal. Michael McCurry, his press secretary, said Clinton told House Speaker Newt Gingrich, R-Georgia, in a telephone conversation that he was "intrigued" with the suggestion and arranged for aides from both sides to meet Thursday. The president told a campaign audience in Louisville, Ky., that he and Gingrich had a "good conversation."

The pressure for a deal on the debt limit was increased late Wednesday afternoon when Moody's, a leading credit-rating service, announced that it was considering lowering its rating for $387 billion in Treasury securities out of a growing fear that the stalemate could lead to a government default. Wall Street executives said the warning was likely to drive down the price of the bonds.

Gingrich made the proposal in a morning news conference and called it a response to Clinton's appeal in his State of the Union Message that the administration and the Republicans work together. Sen. Bob Dole of Kansas, the majority leader, endorsed the idea in a letter made public later.

Dole, who is seeking the Republican presidential nomination, said in Anamosa, Iowa, where he was campaigning, "The White House might accept at least a partial tax credit of $125." That would be 25 percent of the $500-per-child credit the Republicans have sought.

Gingrich said there was already enough agreement between Republicans and the president to provide a "healthy" start toward balancing the budget, perhaps $55 billion dollars of savings. But he said Republicans would probably not achieve a real balanced budget "while President Clinton is in the White House."

"We are tremendously apart on basic policy issues," such as changes in Medicare, Gingrich said.

Republicans have used the debt limit - the need for an extension of the nation's borrowing authority - as a major club as they have sought to force Clinton to agree to a budget that would be balanced by 2002. The country's debt reached the existing statutory limit of $4.9 trillion on Nov. 15, and since then Treasury Secretary Robert Rubin has juggled money in pension accounts to prevent the government from defaulting on bond interest and other obligations. But he has said he cannot do that beyond March 1.

Wednesday's move was a clear Republican retreat in the long-running budget war with Clinton, following acknowledgments by Gingrich and other leaders that their strategy of using government shutdowns and the threat of default as leverage against Clinton had failed.

But it was a strategic withdrawal, not a rout. If successful, the new tactic would give Republicans the ability to claim in this year's election campaign that they had made a start toward balancing the budget - in keeping with their slogan, "Promises Made, Promises Kept." Until now, all their major promises have been thwarted, by either Clinton's vetoes, Democratic opposition in the Senate or disagreements among Republicans.

In internal party politics it appeared to be a victory for Dole, who had criticized both the shutdown and the debt strategies, over Republican hard-liners and also for Gingrich, who came to agree with him. Most of all, it is a vindication of Rep. John Kasich, R-Ohio, chairman of the House Budget Committee, who was sharply criticized by other Republicans for saying on national television Jan. 14 that Congress should pass a debt ceiling extension without conditions.

One of those critics, Rep. Dick Armey, R-Texas, the majority leader, appeared with Gingrich and other leaders at Wednesday's news conference, in apparent agreement.

But some other Republicans were unhappy. "I feel my leadership has gone too far," said Rep. Christopher Shays of Connecticut.

Six Republican freshmen met Wednesday night with their leaders, bringing a variety of complaints - about the shift in the debt limit strategy, about lack of insistence on a large tax cut, and about other recent leadership moves that they saw as weakness. But they declined to discuss their complaints with reporters.

While the Republican proposal would not be the "clean" debt limit extension, free of other matters, that the administration had demanded, it would differ dramatically from one passed in November and vetoed by Clinton. That bill included provisions that Republicans knew Clinton would not accept, like a ban on the financial maneuvering Rubin had been doing. This one, as described by Gingrich, would incorporate only elements that Clinton is ready to accept.

The Gingrich proposal was couched, first in a series of interviews on morning news programs and then in the news conference, as a response to Clinton's State of the Union address, in which the president urged the enactment of those proposals that both sides' budget plans have in common.

But the speaker had discussed the idea with a few Republicans earlier Tuesday, and mentioned it to reporters Tuesday afternoon before he knew what Clinton would say.

Clinton said Wednesday, as he had Tuesday night, that a seven-year balanced budget was still attainable.

But Kasich said: "In terms of major agreements, we're universes apart. We remain there."

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Photo (Color) House Speaker Newt Gingrich details the latest budget offer. Associated Press