US budget figures indicate surplus of over $1,080bn

President Clinton yesterday revealed projections showing larger-than-expected federal budget surpluses, opening the door to deeper tax cuts this year.

Outlining a revised forecast of an extra $1,080 billion (#1,040 billion) in surpluses over the next 15 years compared with his February budget, Mr Clinton reaffirmed his desire to use most of the money to overhaul the social security (state pension) and medicare programmes. But he did not rule out broader tax relief - something the Republican-led Congress wants to implement.

For the current fiscal year, the administration now expects a surplus of $99 billion, the largest ever, and $20 billion greater than previously predicted. Crucially, the update projected a $5 billion surplus after all social security pay-outs in the fiscal year beginning October 1st - the first such surplus in 40 years. It is this side of the budget that Republicans have been eyeing as a source of funding for tax cuts.

Over 15 years, this category is expected to produce surpluses totalling $715 billion. Significant differences remain between Mr Clinton and Congress over what type of tax relief to provide.

Republicans are preparing a $778 billion 10-year plan aimed at shoring up the party's appeal to families and businesses. It is expected to include cuts in the rates of capital gains tax and inheritance taxes.

Mr Clinton has tended to favour targeted tax credits to bolster education and healthcare spending. Yesterday, he repeated his determination to see social security funds kept off limits for tax relief.

Under his plan, about $543 billion of the new surpluses would extend the solvency of the social security programme to 2053. Medicare, the federal healthcare plan for elderly and disabled, would be put on a sound footing until 2027 with an infusion of $794 billion - an improvement of about 10 years.

Mr Clinton said the net effect of his proposals would be gradually to wipe out the national debt of $5,700 billion.