Senate Approves Bare-Bones Budget to Meet Deficit Target - Funding: Congress races to head off sweeping spending cuts by White House, as mandated by Gramm-Rudman law.

After more than a week of fruitless maneuvering for partisan advantage over capital gains, Senate leaders put aside their differences long enough on Friday to agree on a plan to strip hundreds of special-interest provisions from a $14.1-billion deficit-reduction bill.

The move postpones long-awaited showdowns between Senate Democrats and Republicans over such contentious issues as a capital-gains tax cut, individual retirement accounts and support for child care.

The agreement led to Senate passage Friday night of a bare-bones budget measure, which is designed to slice the deficit for fiscal 1990 slightly below the Gramm-Rudman deficit reduction law’s ceiling of $110 billion. The vote was 87 to 7.

As a result, Congress could move quickly to rescind the widespread spending cuts that must be imposed by the White House on Monday to comply with Gramm-Rudman.

“We think this is absolutely the best approach,” said Sen. Pete V. Domenici of New Mexico, senior Republican on the Senate Budget Committee. “We get good government in the fair-deal sense.”

But House leaders have not agreed to modify their own deficit bill--which includes a capital gains tax cut, new federal child care support and dozens of other added features--to conform to the simpler Senate version. Aides to the House Democratic leadership said they expect to follow the normal, time-consuming process of convening a conference to work out the differences between the two versions of the legislation.

Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.) acknowledged he could be at a disadvantage in any bargaining with the House. The House bill remains full of extra provisions useful as bargaining chips, he said, and “I don’t have any chips left.”

Moreover, many of the buried special-interest provisions are expected to come back to life in a separate bill the Senate is likely to take up before the month ends. Sen. Bob Packwood of Oregon, senior Republican on the Finance Committee, said the agreement “ensures that we will have another tax bill very soon--two or three weeks” to which the capital gains reduction, expanded deductions for individual retirement accounts and many other provisions could be added.

Republicans, who acknowledged they did not have the 60 votes to boost the capital gains measure over Democratic procedural obstacles, contended Friday they will be able to muster enough forces to overcome an expected filibuster by opponents of a capital gains tax cut.

Although it also takes 60 of the 100 senators to end a filibuster, Republicans argued they would win more backing once capital gains is no longer wrapped up with the debate over the must-pass deficit bill. “We have a much better shot at capital gains with this out of the way,” Domenici said.

Democrats, however, vowed to fight the capital gains cut down to the wire.

“I don’t give a damn” about objections that a filibuster on an upcoming bill to raise the federal debt ceiling runs the risk of shutting down the government, said Sen. Howard M. Metzenbaum (D-Ohio).

In addition to dropping literally hundreds of special-interest provisions, the bill also strips out a number of important measures. These include a major reform of Medicare payments to doctors, repeal of Section 89 employee benefit rules and allowing Social Security recipients to earn extra outside income.

The bill retains only the bare minimum of revenue increases necessary to meet its deficit targets, including a one-year extension of the airline tax, narrowing of tax benefits for employee stock ownership plans, a tax on chemicals that harm the ozone layer and a more limited speedup of the collection of payroll taxes than originally planned.

“If they had 60 votes,” said Senate Majority Leader George J. Mitchell (D-Me.), whose party controls the Senate with a 55-45 edge, “they would have gone ahead already.”

At the White House, officials expressed disappointment over the decision not to pursue an immediate capital gains vote, but they said that Bush was likely to support the bill.

“This gets us back to budget basics,” one aide said.

Bush told reporters during a news conference earlier in the day that he was willing to consider a compromise on a capital gains tax cut, one of his key campaign positions, and liberalized IRAs, which Democrats have pushed as a politically appealing alternative to cutting capital gains taxes for the wealthy who benefit the most from profits on investments.

The essential parts of the deficit measure would raise taxes by about $5.3 billion and cut spending by $8.7 billion. But as the measure worked its way through eight committees, it picked up hundreds of amendments to benefit farmers, loggers, low-income families, the poor, the sick, the oil industry and higher-income retirees.

The bill became so laden with benefits for one group or another that it had to include $38-billion worth of tax increases over five years to have enough money left over to meet deficit-reduction targets.