WASHINGTON -- President Bill Clinton signed into law yesterday the first major economic bill of his administration, which contains both growth incentives and large tax increases and spending cuts aimed at reducing the federal deficit by $496 billion over the next five years.

Clinton signed the legislation, including provisions that extend and expand the use of tax-exempt bonds, in a festive outdoor ceremony at the White House attended by congressional leaders who shepherded the measure through mine fields in both houses.

"Buy bonds," joked one congressional sponsor, Sen. Daniel Patrick Moynihan, D-N.Y., the chairman of the Senate Finance Committee, to reporters just before the ceremony.

The measure carries the economy's first dose of "Clintonomics," a combination of select incentives for growth mixed with stiff deficit reduction medicine.

While the measure's selective spending increases and big tax rate hikes on the well-to-do have drawn fire from congressional Republicans and apprehension from the public, Clinton made no apology in signing them into law.

"I plead guilty," he said, contending that the changes are needed to correct deep structural problems and set the economy on a path toward sustained growth.

Clinton devoted himself to winning approval of the long-term economic measure after the defeat of his $16.3 billion jobs stimulus bill this spring, often stating his belief that the measure would be even more powerful in spurring economic growth because of its potential to hold down long-term interest rates.

The financial markets rallied when Clinton announced the plan in February and, after months of seemingly taking enactment for granted, this week rallied again after the bill passed Congress by only the narrowest of margins. The rate on Treasury 30-year bonds on Monday fell to a 16-year low, yielding 6.46%, while the Dow Jones Industrial Average hit a record high of 3,576.08.

The bill's enactment comes after months of stinging partisan attacks and substantial criticism from within Clinton's own Democratic party that the measure's rocky road through Congress had forced the President to weaken it by making concessions to lawmakers representing narrow interests.

In the end, for example, the law raises about $40 billion less in revenues over five years than Clinton proposed in February -- and substantially less in the long run -- largely because he agreed to drop his $72 billion broad-based energy tax and replace it with a smaller, $23 billion fuels tax increase.

Also jettisoned along the way because of the loss of the energy tax revenues were many of Clinton's originally proposed tax incentives. His tax-exempt bond initiatives were not spared in the paring process, but they nevertheless survived the bill's congressional ordeal surprisingly intact.

They feature the first permanent extensions for mortgage revenue bonds, small-issue industrial development bonds, and the low-income housing tax credit approved by Congress. The three provisions, which are retroactive to the previous June 30, 1992, expiration date, are effective upon enactment of the bill.

Another provision in the final bill would end the requirement that high-speed rail project bonds receive a state volume cap allocation for 25% of each issue. But Congress scaled back Clinton's original proposal to apply only to governmentally owned projects, not to privately owned ones.

Congress also approved 104 of Clinton's proposed 110 enterprise and empowerment zones for economically distressed areas. For both types of zones, the plan would permit the issuance of a new category of exempt-facility bond to finance businesses in the zones. But Congress pared back Clinton's original proposal that would have made the bonds bank deductible and partially exempt from volume caps.

Despite the loss of some original items, Clinton was satisfied with the product after it emerged from congressional negotiations. "I think the things that I care about are there," he said, citing the plan's nearly $500 billion of deficit cuts and its progressive tax scheme.

"The big guts of the things that I proposed way bank in February have survived this whole legislative process. And I feel good about it," he said.

Even Clinton's Republican critics concede he came close to achieving his original $500 billion goal. In contrast to the 1990 budget agreement, watered down considerably after a stronger but less popular package failed to pass the House, the Clinton plan relies on only a few budgetary gimmicks.

According to Bill Hoagland, Republican staff director of the Senate Budget Committee, heavy horse-trading in the final days of negotiations last month led to the adoption of about $20 billion of obvious "smoke and mirrors" devices.

They include about $10 billion more of interest savings on the debt than the Congressional Budget Office estimates, $3 billion more of purported income from the sale of spectrum licenses to broadcasters, and about $5 billion of entitlement savings already achieved by Congress Hoagland said.

About $44 billion of discretionary spending cuts in the package also were previously mandated under the 1990 agreement, which leads Republicans to put the total savings at $428 billion. But other analysts give the administration credit for those cuts, and put the total savings at around $475 billion.

According to the administration's estimates, the package will reduce the deficit from about $285 billion this year to under $200 billion in 1998, and will reduce growth in the national debt to about $1 trillion from about $1.5 trillion over that period.

The bill permanently raises the national debt ceiling to $4.9 trillion to accommodate the growth of debt. With current debt outstanding at close to $4.3 trillion, the increase is expected to last between two and three years.

While economists are mixed in their expectations of progress under the plan, most say it benefits from better timing than the ill-fated 1990 agreement, which was put in place just as the economy was plunging into recession.

This plan takes effect just as the economy is starting to pick up speed, according to Laura Tyson, chairman of the Council of Economic Advisers. As a result, she said, most economists will make only a small downward revision in their growth forecasts.

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