January 12, 1993

WASHINGTON, Jan. 11 -- President-elect Bill Clinton's choice as budget director, Leon E. Panetta, told Congress today that Mr. Clinton's campaign promise to cut the taxes of the middle class was a lower priority than cutting the deficit and increasing spending for new projects the Democrats favor. In Little Rock, Ark., as part of what may have been a coordinated effort by the Clinton team to back away from this central campaign pledge, two top transition advisers also suggested today that the tax-cut promise was being reconsidered.

Fearful that the enemy will gain superiority, one side sinks vast amounts of money into building sophisticated weapons. Its adversary, now frightened that it may be vulnerable, agonizes over whether to match the investment or up the ante. In this race, the contestants are New Jersey, New York and Connecticut. The war is over jobs. The weapons systems are advanced telecommunications networks capable of delivering an array of high-tech services. And the moves and countermoves all put enormous sums at risk. Yesterday, a Connecticut regulatory agency gave the Southern New England Telephone Company preliminary approval to increase capital spending on its telecommunications network over the next four years to between $1.2 billion and $1.4 billion. That would be an increase of 50 percent or more. The agency, the Department of Public Utility Control, said it hoped to make a final decision on the investment and deregulation plan -- and the service rates needed to pay for it -- in the late spring.

A man with an extensive criminal record led the state police on a wild chase through rural central Connecticut today, stealing a new Mustang from a dealer, shooting a car salesman, crashing the car and then hijacking a school van with two children aboard before he was killed in a fierce shootout with the police. A 13-year-old student in the van was also shot, but a state police spokesman, Sgt. Scott O'Mara, was uncertain whether the child, who was listed in critical but stable condition with a chest wound, had been shot by the gunman or wounded in the gunfight.

In the latest in a string of incidents apparently intended to taunt President Bush in his final days in office, President Saddam Hussein has moved surface-to-air missiles into the air-exclusion zone in the northern part of his country, Administration officials said today. The action took place two days after the White House announced that Baghdad had backed down and moved its anti-aircraft missiles in southern Iraq. But it also follows a string of provocative actions by President Hussein, including incursions by hundreds of armed Iraqis into territory that the United Nations has awarded to Kuwait. Iraq said it entered the territory on Sunday and today to retrieve weapons, ammunition and equipment that belonged to Baghdad. "Hussein Is Trying to Cheat' Iraq said the dispute over its incursions had been caused by a misunderstanding of conditions from the United Nations Security Council. Tonight the Council condemned the action and warned of "serious consequences" for Iraq's defiance. [ Page A2. ]

RUSSIAN scientists are planning soon to unfurl a glistening sheet of plastic in space as a first step toward testing an intriguing notion about turning night into day -- or at least twilight. Tucked aboard a Progress cargo spacecraft attached to the Mir space station is an experiment called Znamya, or Banner, that will test the idea of using a mirror in space to reflect sunlight down to Earth.