Bush, Frustrated by Budget, Tax Issues, Escalates Rhetorical Fight With Congress : Policy: He could set off all-out war if he tries to seize line-item veto power. Deadlines are nearing for key money bills.

The Bush Administration demonstrated its frustration over the budget morass Tuesday as it sharply escalated its rhetorical battles with the Democratic leadership of Congress.

White House spokesman Marlin Fitzwater accused Democrats of playing politics and going to “incredible lengths” to deny Bush a vote on his proposal to lower capital gains taxes. At the same time, Fitzwater confirmed that the Administration is “looking for a vehicle” to test the novel legal argument that Bush has the power to exercise a line-item veto over legislation.

Even Bush supporters acknowledged that the veto strategy, if tried, would be a declaration of all-out war with the Democrats over budget policy.

The escalating rhetoric on capital gains and the threatened test of a line-item veto are both symptoms of the ever-deepening gridlock over the nation’s fiscal policy. For most of the year, the federal budget has operated almost on autopilot, and there is little likelihood of that changing soon.

The government faces a series of deadlines for key money measures over the next several days, and both the Administration and the Democratic leadership are jockeying to assure that the other side gets blamed if those deadlines are missed.

“There’s an increased frustration level on all sides because this year began with the hope that we wouldn’t come to this point,” said Rep. Leon E. Panetta (D-Monterey), chairman of the House Budget Committee. “We’ve entered the macho period where everybody tries to talk tough.”

The tough talk from the White House on Tuesday focused on Bush’s capital gains proposal. Democrats in the Senate have been blocking a key budget bill to prevent Bush’s allies from using it as a vehicle for the capital gains tax cut.

“We find it very difficult to understand that the leadership would be willing to hold up the entire budget of the United States to make a political point,” Fitzwater said.

Senate Majority Leader George J. Mitchell (D-Me.), in return, criticized the Administration for pressing capital gains so hard that it now threatens to bring the government to a halt.

“Capital gains has become the Holy Grail of this Administration,” Mitchell said. In pursuit of that goal, the White House “has cast aside any concern for the budget deficit and now it has cast aside concern for fairness . . . (and) concern for relations with Congress.”

Given the already tense relations between the White House and Congress, raising the line-item veto issue now appears to be a calculated attempt by Bush and his allies to strike a tough stance.

“I assume the reaction would be violent,” with complaints from both Republicans and Democrats, if Bush tried the tactic, Sen. Pete V. Domenici (R-N.M.) said.

But, Domenici said, Democrats will “never” approve a measure to give Bush a line-item veto, so perhaps the best course would be for the President simply to try to take the power and let the courts sort out the issue.

“Let’s test it,” said Sen. Alan K. Simpson (R-Wyo.), the Senate’s deputy minority leader. “I’d like to see him try.”

Panetta, reflecting the Democratic view, said that any such move by Bush would be a mistake that “resurrects the image of Richard Nixon,” who tried to assert power to block spending measures approved by Congress during his presidency.

“They’re essentially challenging the balance of powers” between the legislature and the executive branch, Panetta said.

Traditionally, presidents have assumed that they have power only to approve a bill in its entirety or disapprove it, rather than approving some parts and vetoing others, as most state governors can do. But some conservative legal scholars argue that the Constitution does, in fact, allow a President to veto specific “line items,” and Bush aides said Monday that the President had decided to give that theory a try if a good test case could be found.

In the meantime, Congress faces several budget deadlines over the next week. The first deadline comes today, when Congress must complete work on a continuing resolution needed to keep many parts of the government operating because most regular appropriations bills are stalled. Congress is expected to meet that deadline.

A more difficult test will occur next Tuesday, when both houses must agree on a bill to increase the government’s borrowing limit. If that bill does not pass on time, crucial items--from Social Security checks to military pay--could be at least temporarily stalled.

Finally, Congress and the Administration still have to agree on a bill to cut $12 billion from the deficit. If no agreement is reached on that bill, $16 billion in automatic across-the-board spending cuts that took effect earlier this month will continue.

Staff writer Tom Redburn contributed to this story.