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. Last Updated: 07/27/2016

Balanced Budget Out in New Offer

WASHINGTON -- House Republicans have unexpectedly abandoned their goal of enacting a seven-year balanced budget plan this year and instead sought to strike a deal with the White House on a modest package of deficit reduction and tax cuts.

The new initiative came Wednesday, one day after President Bill Clinton gave a well-received State of the Union address that urged Republicans to compromise with him after a year of bruising budget battles that resulted in two government shutdowns.

But those confrontational tactics have cost Republicans support in the polls and given a sharp boost to Clinton's re-election chances. Overnight polls indicated that the president won even more support for his handling of the budget crisis with his conciliatory speech Tuesday night, while a tough and partisan response by Senate Majority Leader Bob Dole suffered in comparison.

House Speaker Newt Gingrich -- who by several accounts took leading Republicans by surprise with Wednesday's gambit -- told a news conference that he wanted to assemble a package of about $100 billion in spending cuts and a two-year tax cut and attach it to legislation increasing the debt ceiling.

"We do not believe it's possible right now to get to a budget agreement,'' Gingrich said of the 12-month effort to eliminate the deficit by 2002. But he emphasized to several reporters later that he wanted a bipartisan deal to raise the debt ceiling that Clinton was certain to sign.

One of Wall Street's chief credit-rating agencies even threatened Wednesday to lower the pristine credit rating on some U.S. bonds if default is not averted by March 1.

Only last Sunday, House Majority Leader Dick Armey insisted that the House would not increase the $4.9 trillion debt ceiling without major concessions by Clinton on a range of Republican priorities. Wednesday, Armey glumly stood next to Gingrich as the speaker outlined his new plan.

Within an hour, Clinton had phoned Gingrich as he flew to a political function and told him he was "intrigued'' by the proposal, according to Gingrich and Clinton aides. "We had a very good conversation,'' Gingrich said.