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BUDGET AX MAY HIT ANNUAL INCREASES IN BENEFIT CHECKS

Annual cost-of-living increases for Social Security recipients and federal pensioners are likely to be smaller than usual under budget cuts now being considered by Congress.

House Budget Chairman John Kasich, R-Ohio, said Wednesday that a revised Consumer Price Index will be part of a package he is proposing aimed at balancing the federal budget by 2002.Rick May, staff director of the House Budget Committee, said some economists, including Federal Reserve Chairman Alan Greenspan, believe the current index tends to overstate inflation by anywhere from 0.5 percent to 1.5 percent a year.

By using conservative measurements, Congress could save billions of dollars in cost-of-living outlays as part of a budget-balancing resolution it hopes to pass by Memorial Day weekend.

Kasich repeated his promise to push for tax cuts, even though Senate budgeteers, led by Sen. Pete Domenici of New Mexico, doubt that the budget can be balanced if taxes are reduced at the same time.

"Cutting the capital gains tax is all about prosperity," Kasich told the conservative Citizens for a Sound Economy at its monthly luncheon. "Over time it will cost us no revenue."

Kasich described tax cuts as the "crown jewel" of the House "Contract With America" and said the family tax credit ($500 for each child under 18) is essential. "We sure as heck ought to be doing it."

Kasich said he "wasn't sure" what the final tax package will look like, an indication that cuts approved in the House may have to be modified.

The House, for example, rolled back part of the tax that retirees with substantial incomes must pay on their Social Security benefits. The tax money goes into the Medicare trust fund, which already is expected to go broke by 2002 unless changes are made.

Kasich criticized President Clinton as too timid for proposing a 1996 budget that includes annual deficits of about $200 billion a year stretching into the next century.

He said the 1996 presidential election won't mean much if Congress fails to balance the budget.