A week before the GOP takeover of Congress, President Clinton says he'll seek compromises with Republicans on tax cuts, health care and welfare reform but cautions, "There will be differences. There will be hard fights."

And Clinton, despite devastating Democratic losses in the November elections, announced he will be a candidate for re-election in 1996. He said he wasn't worried about the threat of a Democratic challenger for the nomination."I intend to seek re-election but that is not uppermost in my mind," Clinton said in an Oval Office interview.

Rather, Clinton said, his top priority will be to get Congress to enact his "middle class bill of rights," offering $60 billion worth of tax cuts, including expanded tax credits for people with children, more retirement accounts and tax-deductible college tuition.

Republicans have their own ideas about tax cuts and welfare reform, and they'll be in the driver's seat next Wednesday when the GOP takes control of both houses of Congress for the first time in four decades.

On taxes, for instance, Republicans have suggested a $500-per-child tax credit, a reduction in capital gains taxes and an increase in the Social Security earnings limit.

"I don't think we ought to get into a bidding war over tax cuts and ignore the important need to keep restraint on the deficit," Clinton said. He said he has shrunk the national debt by $10,000 for every family in the country "and I don't think we ought to walk away from that."

In terms of welfare, Republicans are proposing a bill that seeks to discourage illegitimacy by ending cash and housing benefits to single teenage mothers and their children.

Clinton said, "I don't believe we ought to hurt poor people who are trying their best to do right and who are looking for a hand up, not a hand out."

He also said he'd oppose any effort to cut education funds.

In terms of health reform, Clinton said he'd sent congressional leaders a letter urging cooperation on a bill addressing the problem in "a more step-by step fashion."

"I know that what I proposed didn't pass last year . . . but the problem didn't go away," he said.

In general terms, Clinton said he has a fundamental difference with Republicans.

"What I do not agree with them on is that somehow government is inherently the problem. There is a role for government in a modern society. And government cannot create opportunity but it can expand it."

Despite November's Republican sweep, Clinton said, "I'm looking forward to this next year with a great deal of optimism and hope about our country."

Clinton claimed that his administration has produced results where Republicans failed during 12 years in the White House.

"There's the talkers and there's the doers," he said, adding that his administration has shrunk the size of government and returned power to the states.

Clinton also said he wants his wife, Hillary, to remain an activist in his administration despite the failure of health-reform legislation that she championed.

"Ordinary voters were convinced - wrongly - that we want the government to run their health care and take their choice away," the president said. He added, "I'm not discouraged or despondent" that health reform failed.

"I believe with all my heart that I'm doing what's right for this country," he said. "Other people talk about problems; I try to do something about them."

A day after a judge refused to shield Clinton from questioning about allegations of sexual harassment when he was Arkansas governor, the president also said he was not distracted by ethical and legal questions facing him and some of his political allies.

"I'm just going to cooperate and roll on, do my job," the president said.

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ADDITIONAL INFORMATION

New Year's plans

President Clinton flew to Camp David on Friday with his wife Hillary for an overnight stay before heading for Hilton Head, S.C., where he will gather with old friends on their traditional "Renaissance Weekend" to ring in the New Year. He also planned to spend a few days in Arkansas early next week, returning to Washington on Wednesday for the opening day of the 104th Congress.