Bush to Use Tax Hike Proposal to Push Deficit Cuts

The White House indicated Tuesday that it plans to use the new budget proposal by Rep. Dan Rostenkowski (D-Ill.) to prod Congress into starting serious negotiations on reducing the federal budget deficit--even though President Bush says he still opposes any tax increase.

Under the new strategy, the Administration will hold out the Rostenkowski proposal as a potential negotiating document to coax the House and Senate budget committees to draft deficit-reduction plans that are closer to what the White House wants.

If the Administration does not get its wish by April 15--the deadline set by Congress for the budget committees to prepare their proposals--the White House will go over the heads of the committees and attempt to negotiate with Democratic leaders, using the Rostenkowski plan as the basis for the talks.

The strategy, outlined by Budget Director Richard G. Darman, is based on an assessment by the White House that Bush virtually had to embrace the Rostenkowski plan because it was the first one that any Democrat has proposed that seemed anything more than a political ploy.

Rostenkowski, chairman of the House Ways and Means Committee, which originates tax legislation, proposed to wipe out the federal deficit by 1994. His package includes excise tax increases and a one-year freeze on Social Security benefit increases--actions opposed by Bush and many Democrats.

At a press conference Tuesday, Bush repeatedly praised the tone of Rostenkowski’s plan and the “evident goodwill on his part and determination to try to break the ice and move the process forward.” But he said he still opposed raising taxes.

When asked whether he could still assure the American people that there would be no new taxes this year, Bush responded: “You know my position, and I have no intention of changing that position.” But he pleaded: “I’m only one player.”

Congressional Democrats are wary of Bush’s strategy of forcing action on a deficit-reduction package. They fear that the President might trap them into initiating legislation to raise taxes, then veto the bill and claim political credit for blocking a tax hike.

House Speaker Thomas S. Foley (D-Wash.), insisting that the President must endorse any tax increase in advance, noted pointedly that Bush reiterated his opposition to tax increases during his press conference. “Until that changes, proposals like . . . Rostenkowski’s cannot be enacted,” he said.

At the same time, key members of the House and Senate budget committees were decidedly lukewarm about both the Rostenkowski plan and the suggestion to hold a White House-congressional “budget summit,” as Bush apparently would like to see. A similar effort last year ended in charges by each side that the other had reneged.

Senate Budget Committee Chairman Jim Sasser (D-Tenn.), an outspoken critic of the “summit” concept, lambasted the Administration’s new strategy as “political opportunism.” He referred to Rostenkowski as “a lone Democrat.”

Part of the reason that House and Senate Democratic leaders are opposed to a White House-congressional budget “summit” is that the arrangement would take the negotiations out of the hands of the budget committees and leave other leaders, such as Rostenkowski and Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.), holding most of the cards.

Administration officials said Tuesday that it was still too early to speculate on what trade-offs might be likely if the two sides want to begin bargaining. However, Bush has proposed cutting taxes on capital gains, while Rostenkowski’s plan calls for raising income tax rates for high-income taxpayers. Both proposals would affect upper-income groups.

Darman told reporters Tuesday that the Administration had seized on the Rostenkowski plan so quickly because it appeared to be “the first serious proposal that has been put in the public domain by Democrats” and “we haven’t had any useful proposals” before.

He dismissed any suggestions that the White House might be preparing a political trap for Democrats by leading them into endorsing a tax increase. “We’re not trying to be cute about it,” he said.

In a conversation with reporters, the budget chief repeatedly parried suggestions that the Administration might be willing to compromise on tax hikes. Even if there were to be “a breakthrough proposal,” he added, “I’d be surprised if any minds were changed” on tax hikes.

At the same time, Darman noted pointedly that the amounts that Rostenkowski has proposed in revenue increases during each of the next few years are similar to those outlined in the Administration’s budget, which calls for steady increases in “user fees” such as airport taxes.

He hinted that Bush would accept increases in a wide array of “user fees” as long as they did not seem to be excessive.

Darman said the Administration intended to give the congressional budget committees until April 15 to produce a deficit-reduction package. If the committees “can’t produce,” he said, “then maybe it’s time to sit down with the people who can produce”--meaning Rostenkowski and other House Democratic leaders who may be interested in negotiating.

Republicans in Congress were sympathetic to the Administration’s new strategy, but many lawmakers in both parties clearly were uncomfortable about endorsing Rostenkowski’s plan for a tax increase.

Rep. Duncan L. Hunter (R-Coronado), who attended a meeting Bush called to brief congressional leaders Tuesday, said that the plan “gives new hope to the Administration that we’ll be able to put together a (budget) summit.”

On a related issue, Bush sought to play down reported differences with Federal Reserve Board Chairman Alan Greenspan over interest rate levels. He asserted that “there is no bubbling war with Alan Greenspan. . . . There is no discussion of that nature at all.”

At the same time, Bush indirectly conceded the flap by noting that “when there are some differences, it’s always built into a conflict between the President and the chairman of the Fed.”

The Times reported last week that Bush was so angry about Greenspan’s refusal to lower rates that he had told advisers he is unlikely to reappoint Greenspan when his term expires in 1991.