Negotiators Near Agreement on Budget

Congressional and White House negotiators neared agreement Tuesday night on a preliminary budget plan that would narrow the deficit by about $27 billion, sources said, with President Bush accepting about $4 billion less than he had proposed for defense spending.

In the tentative accord, expected to be announced as early as today, Democrats have agreed to pursue more than $10 billion in domestic spending cuts.

An agreement would set the broad outlines of spending priorities for the 1990 fiscal year, which begins Oct. 1, and improves the chances that Congress will avoid an impasse with the White House over the budget. But such a plan must still clear a number of hurdles and does not address many specifics of programs that are subject to future legislative wrangling.

Grab Bag of Tax Changes

Previously, budget negotiators had agreed to raise about $14 billion from a variety of revenue measures, including a grab bag of tax changes worth about $5.6 billion to go along with additional user fees and sales of government assets.

Administration officials, led by Richard G. Darman, director of the White House Office of Management and Budget, and Treasury Secretary Nicholas F. Brady, demanded that any tax changes approved by Congress be limited to relatively minor loophole closings so that Bush’s “no new taxes” campaign pledge would not be violated.

At the same time, congressional aides said, Administration officials dropped their insistence that lawmakers accept the White House contention that its capital gains tax cut proposal would raise $5 billion next year. But the Administration told lawmakers that Bush would continue to pursue his plan to limit capital gains to a maximum of 15%, less than half the current top rate.

The military, according to both Administration and Capitol Hill sources, would receive authority to spend about $305 billion, a $4 billion cut from the $309 billion Bush said was necessary just to keep up with inflation. Bush met with Defense Secretary Dick Cheney Tuesday to discuss the new limits on Pentagon spending.

Rep. Bill Frenzel (R-Minn.), the top-ranking Republican on the House Budget Committee, said that negotiators are hoping to reach agreement soon on the overall plan. He suggested that only minor stumbling blocks remain.

Senate Budget Committee Chairman Jim Sasser (D-Tenn.) said that negotiators are working on a number of “loose ends” and are consulting with other congressional leaders about the outlines of the plan.

On the domestic side of the budget, negotiators had agreed earlier to extract about $2.7 billion in savings by holding down spending on the Medicare program for the elderly.

Bush originally had sought almost $5 billion in Medicare cuts. Democrats wanted to limit the budget savings to about $2 billion, which would have meant almost no changes in the way the government currently pays hospitals and doctors. Lawmakers also refused to accept a Bush proposal to require state and local government employees to pay Medicare taxes, congressional aides said.

The plan, while couched in general terms, also calls for making cuts in farm support payments and other government benefits programs.

But even after reaching the tentative agreement, the spending blueprint ultimately could fail to meet the $110-billion deficit ceiling that the Gramm-Rudman budget law requires if interest rates do not fall from current levels.

That means lawmakers may be forced to seek additional savings during the summer and early fall to escape the automatic spending cuts that Gramm-Rudman would impose if Congress does not adopt a budget by Oct. 1 that meets the $110-billion target.

Under the tentative budget plan, the Pentagon would fail to keep pace with inflation for the fifth year in a row, losing almost 2% of the substantial real spending increases it achieved from 1980 through 1986.