BEYOND THE PAIN, A REVIVAL OF THE AMERICAN DREAM

The pain seems all too immediate. benefits are cut, programs terminated, federal employees laid off. But would a balanced budget bring any quick payoff for the average American? Yes, according to many economists and Wall Street analysts. A deficit-free America would enjoy widespread benefits in the form of lower interest rates for mortgages and business loans. That would spur a boom in housing construction and business investment, creating jobs and raising incomes.

It may sound like trickle-down economics, but the process is much more reliable. Eliminating the deficit would ease the government's demands on America's already shallow pool of savings, which by some estimates keeps interest rates percentage points higher than they would be under a balanced budget. Tear up Uncle Sam's credit card, and interest rates drop, allowing the private sector to grow as the government retreats. "What's at stake is nothing less than rekindling the American Dream," says Matthew Miller, a former Clinton budget official who quit this year over the White House's refusal to continue cutting the deficit.

Would-be home buyers would be the clearest winners. Ann and John Pask, a Dallas couple in their early 30s, have been nervously eyeing mortgage rates as they contemplate buying a home to fit the family they plan to begin in two years. The Pasks, who support balancing the budget, hope it would bring them something tangible: a lower monthly payment. At current mortgage rates of about 8%, the Pasks would pay $734 a month on a $100,000 loan, which would be cut to $665 if rates dropped 1 percentage point. They would save $28,246 over the life of the loan, enough to put one of their future children through a year of college. "We have friends who have bought expensive homes," says Ann Pask. "With children, they have had to cut back on everything because the mortgage is just draining them."

Many Americans would find the good news spreading to their paychecks. Economists say the nation's anemic savings rate of 4%, in contrast to Germany's 12% and Japan's 17%, is a key reason behind the stagnation in many workers' wages since 1973. If the U.S. government stops depleting America's savings pool, it would lower businesses' costs of borrowing and enable them to invest in the new equipment that makes their employees more productive, thus fattening their paychecks. Lower rates would also help companies create jobs by building new factories and opening new shops. Roger Brinner, chief economist with the forecasting firm DRI/McGraw-Hill, estimates that balancing the budget would raise America's yearly output an extra 2.5% over the next 10 years. That would mean an average of an extra $1,000 a year for each American family. He adds that the economy would create 2.4 million more jobs by 2005 than if the deficit remained unchecked.