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CLINTON IS WARMING UP TO GOP, DEMO CHALLENGES

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Warming up for battles with the new GOP Congress, President Clinton says he's ready to cut deeper into the deficit and federal bureaucracy but eager to make clear that he started the efforts Republicans claim as their top priorities.

In a spirited defense of his performance and agenda Tuesday night, Clinton said he was open to bipartisanship but, in an apparent counterpunch to recent criticisms from incoming House GOP leader Newt Gingrich, said: "Let's have a contest of ideas. But let's stop this demonizing and get on with the business of America."Clinton, speaking to a Democratic Leadership Council gala, also had some blunt words of advice for his own party, particularly those in the centrist organization who have been critical of him and his administration.

As they responded to their heavy losses in the midterm elections, Clinton said Democrats and particularly policy shops like the DLC have a responsibility. "It is to join me in the arena, not in the peanut gallery," Clinton said sternly. "In the arena and fight and roll up your sleeves and be willing to make a mistake every now and again."

Clinton did not refer to any specific criticism. But just hours earlier, the DLC chairman, Oklahoma Rep. Dave McCurdy, called Clinton a "transitional figure" and said he had undermined the 10-year effort of Democratic moderates to loosen the party from its liberal moorings.

"While Bill Clinton has the mind of a new Democrat, he retains the heart of an old Democrat," said McCurdy. "The result is an administration that has pursued elements of a moderate and liberal agenda at the same time, to the great confusion of the American people."

McCurdy, defeated last month in an effort to a Senate seat, was among a handful of DLC leaders summoned to a private White House meeting before the president spoke, and he struck a far different tone in saying Clinton had made "real progress we can be proud of as Democrats."

In his remarks, Clinton lamented that the most frustrating aspect of the Democrats' midterm defeat was that blue-collar, middle-class workers had deserted the party in favor of Republicans.

In confusing economic times, "the very people you try hardest to help are the ones who turn away," Clinton said. But he said Democrats could win them back. "The answer is not to reverse what we have done but to build on it," he said.

Speaking in indignant tones at times, Clinton said Republicans had won the elections by promising to cut the deficit and the federal government, and now were crowing about those ideas and of shifting more power from Washington to the states.

"The Republicans want to do more," Clinton said. "Come on, let's do it. Let's have a partnership, let's have at it." But he said "they didn't begin it - we did" and implored Democrats critical of his performance "don't you walk away from the fact that we started it and we intend to finish it."