GOP Takes Off Gloves in Bout of Budget Infighting

Eclipsed by the furor over foreign policy, Congress’ debate over the federal budget has slipped quietly into an impasse that is no garden-variety partisan standoff. It is a battle among Republicans over what their party stands for, analysts say.

At issue is whether this year’s budget should put the brakes on the tax-cut drive that has been a hallmark of the Bush presidency, and instead put more muscle behind an old GOP orthodoxy: reducing the deficit.

The dispute has kept Congress from completing one of its most basic annual functions: writing a budget to guide the year’s tax and spending decisions. And it has opened an unusually bitter and personal dispute among prominent Republicans.

A small but powerful faction of Senate Republicans is insisting that the fiscal 2005 budget include rules that require any future tax cuts to be offset so their effect on the deficit would be neutralized; that would mean either cutting spending or raising taxes in other areas. The proposal would strike at the core of President Bush’s domestic agenda if he is reelected by making it much more difficult to cut taxes.

But House Republican leaders have vehemently opposed the pay-as-you-go requirement as an affront to their party’s credo that, when it comes to taxes, the lower the better. They have kept the requirement out of the budget resolution passed by the House -- and have openly questioned the loyalty of Republicans who disagree.

“It is a fight for the heart and soul of the Republican Party: Is it a party about deficit reduction or a party about tax cuts?” said Stanley Collender, a budget expert at Financial Dynamics, a business communications firm in Washington.

The House passed a budget bill last month before Congress adjourned for a weeklong recess. But faced with the objections of a handful of deficit-conscious Republicans, GOP leaders did not have the votes to get it through the Senate. Leaders are looking for a way to win senators over and pass the budget, but chances are it will die a quiet death after Congress reconvenes this week.

The practical effect of not passing a budget would be limited because it only sets nonbinding targets for taxes and spending. Detailed decisions are made in other legislation.

But the political effect would be an embarrassment for Republicans. They control the House and Senate, as well as the White House, and have extolled the advantages of having one party leading all three. In 2002, when the Democrats controlled the Senate and failed to pass a budget, Republican criticism was merciless.

The willingness of dissident Republicans to stand up to the White House on such an important issue in part reflects Bush’s weakened political clout at a time when his public standing has been diminished by troubles in Iraq.

“There’s no question: If the president’s poll numbers are down ... it makes it harder for the White House to have influence,” a senior House Republican leadership aide said.

The idea that deficit-reduction advocates are considered GOP mavericks is a measure of how much the center of gravity has shifted in the party’s thinking about the budget. For years, balancing the budget was an article of faith for Republicans. They styled themselves as the party of fiscal prudence, juxtaposed to the tax-and-spend moniker that they applied to Democrats.

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With President Reagan’s tax-cutting crusade, the party’s focus began to change in the 1980s, and a new generation of anti-tax Republicans began filling the halls of Congress. When Republicans won control of both the House and Senate in 1994, their “Contract with America” called for both tax cuts and a constitutional amendment to balance the budget.

But in Bush, who inherited budget surpluses from the Clinton administration, the Republicans got a leader more committed to cutting taxes than to keeping the budget in balance. After the Sept. 11 terrorist attacks, the president led the GOP to a strong consensus that deficit reduction had to take a back seat to defense spending and tax cuts in order to jump-start the economy.

This year, however, with the economy starting to get back on track and the deficit growing like Topsy, Republicans who were lukewarm to tax cuts before turned downright chilly. They remain a distinct minority in the party, but even a small faction can wield tremendous clout in the narrowly divided Senate.

The dispute centers on the proposed pay-as-you-go rule, which is similar to one that expired in 2002. The provision would require offsets not only for future tax cuts but also for increases in entitlement programs like Medicare and welfare.

The proposal is supported by a narrow majority in the Senate: 47 Democrats, one independent and four Republicans -- Sens. John McCain of Arizona, Lincoln Chafee of Rhode Island and Susan Collins and Olympia J. Snowe of Maine.

Republicans who oppose the measure say it is shortsighted to curb tax cuts when they are needed to spur economic growth, which in turn would increase revenue and reduce the deficit. House Majority Leader Tom DeLay (R-Texas) said the idea was “so contrary to [Republicans’] fundamental beliefs.”

“It negates our argument that you get tax relief to grow the economy and growing the economy grows revenues for the government,” DeLay said.

But the Senate renegades have rebuffed entreaties from GOP leaders and the White House to vote for the budget that has passed the House. They object to the measure because it includes the pay-as-you-go rule for only one year -- and even then with big loopholes for tax cuts.

Senate Republican leaders must sway at least two of the four holdouts to pass the budget. GOP strategists labored during last week’s recess to find a way to lure them, for example, by promising a vote later this year on other measures to enforce fiscal discipline.

If they fail to change minds and no budget passes, Congress still could write the year’s tax and spending bills. But it would be easier to move those measures through the Senate with a budget in place, because it establishes special procedures that expedite tax and spending legislation.

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The stakes are especially high in an election year, when tax cuts are the glue holding the Republicans’ domestic agenda together. Bush’s proposal to make his 2001 and 2003 tax cuts permanent is a central plank of his reelection platform. The pay-as-you-go rule would present an enormous hurdle to fulfilling that pledge if Bush wins a second term.

Against that charged political backdrop, emotions have run high. An uncharacteristically blunt Speaker J. Dennis Hastert (R-Ill.) recently complained about how House Republicans were “bowing and scraping” to the Senate to get the budget passed, and he questioned McCain’s credentials as a Republican.

Grover Norquist, a leading tax-cut advocate and president of Americans for Tax Reform, sees the Senate push to make it harder to cut taxes as the last hurrah of a small faction of moderate Republicans who are a dying breed in the GOP. “This is a problem that electing two more Republican senators will fix,” Norquist said.

But others say the surprisingly stiff resistance to leadership pressure may be a sign that the tide is turning and concern about the deficit is building in Republican ranks.

In addition to the four Republicans in the Senate who supported the pay-as-you-go rule, 11 House Republicans defied party leaders in March and voted for a nonbinding measure endorsing the rule. More Republicans initially voted for it, but at least eight were persuaded by GOP leaders to change their vote. In the end, the measure was rejected. But just barely.

“What’s at stake is: Which does the Republican Party stand for?” said Robert Bixby, executive director of the Concord Coalition, an anti-deficit advocacy group. “At the moment it stands for the tax-cut agenda. But there clearly is also a Yankee Puritan ethic here that says, ‘Pay your way.’ We don’t know if it is a dying gasp or a revival.”