As Budget Chief, Panetta May Be Frugal Deficit Foe

REP. Leon Panetta, President-elect Clinton's choice for the critical White House post of budget director, is legendary on Capitol Hill as a frugal man to work for.

He is said to be as austere and cautious in approving trips or expenses for the staff of the House Budget Committee he chairs as he is relentless in budget politics.

The northern California Democrat is credited by Republicans and Democrats alike in Congress as being a deeply committed foe of budget-deficit spending.

Mr. Panetta's placement in the Clinton administration is a signal that deficit discipline will have a higher priority than it did in the Clinton campaign for the presidency.

"What he's known best for is the conviction and the earnestness with which he approaches this," says Martha Phillips, executive director of the Concord Coalition, the group formed by Sen. Warren Rudman (R) of New Hampshire and former Sen. Paul Tsongas (D) of Massachusetts to fight the deficit. Until recently, Ms. Phillips was the Republican staff director of the House Budget Committee.

"No one could listen to him for very long and not believe he is very, very serious" about his concern for budget deficits, she says. Appeals to moderates

A hard-working student of budget details, Panetta is a conventional enough technocrat that moderates in both parties respect him - especially staff experts. But those on the left and right sides of the spectrum see his appointment as confirmation that Mr. Clinton is soft-pedaling change.

The appointment combines with that of Sen. Lloyd Bentsen (D) of Texas for the post of Treasury secretary. Mr. Bentsen also carries a reputation for fiscal conservatism, but of a different stripe.

Panetta is in many ways a liberal who has worked to expand food-stamp programs for children, but believes strongly that programs should pay their own bills as they go. Bentsen has concerned himself more with the supply side of the economy - promoting tax incentives to encourage investment and savings, many of them as special breaks to industries such as oil or real estate.

"I think this is four more years of Bushism," says Jeffrey Eisenach, executive director of GOPAC, a fund-raising organization for conservative Republicans. The switch to an economic policy run by Bentsen and Panetta from one run by Secretary of the Treasury Nicholas Brady and Director of the Office of Management and Budget Richard Darman, Mr. Eisenach says, is "status quo with a `D' instead of an `R' next to their names."

At the labor-backed Economic Policy Institute, vice president Roger Hickey judges Clinton's first appointments to be a "pretty conventional team." The appointments so far, he says, "don't seem to reflect his campaign."

None of them have actively pushed for structural economic change, stimulating economic growth, or public investment as an equal partner with deficit reduction, Mr. Hickey says.

Panetta has left room in his position in recent months for the possibility of supporting economic stimulus - a move which usually swells budget deficits. But he has insisted that any stimulus necessary by January be balanced with deficit reduction.

He was an important player in the 1990 budget summit that produced a tax increase and new spending controls, but was followed by record deficits. He defends the summit, arguing that deficits would be nearly a hundred billion dollars a year higher without it.

He now advocates cutting the deficit in half in the next four years. He has proposed closing the budget gap with a roughly even combination of higher taxes and cost-cutting measures.

He does not shrink from looking for savings where runaway spending lies - in entitlement programs such as Medicaid, Medicare, and Social Security.

Like Clinton, Panetta has called for greater public investment in areas where deficits are not strictly monetary: greater access to education from Head Start to college assistance; health care that covers everyone; and economic growth supported by better infrastructure, housing, job training, and targeted tax incentives.

He outlined these points in a newspaper opinion piece written more than a year ago, but they could as well have been lifted from this year's Clinton presidential-campaign literature. The two politicians reportedly had a strong rapport in a recent two-hour conversation in Little Rock, Ark. Forward-looking

Panetta has been able to "really break from the usual myopic focus that traps a lot of Washington," says Ellen Nissenbaum, legislative director for the liberal Center for Budget and Policy Priorities. "He thinks about the future and the impact of what he does now."

By temperament, Panetta is patient and optimistic, qualities that serve him well in building consensus on Capitol Hill and staving off requests for favored programs from his fellow Democrats.

A former liberal Republican, he first found fame when he was fired from the Nixon administration in 1970 over policy differences. He headed the civil rights office in the Department of Health, Education, and Welfare. He raised the ire of conservatives in the administration and Congress by pushing for faster racial desegregation than he was seeing.