Budget Talks Show Little Progress : Deficit: Both sides blame each other for the lack of gains in three months of negotiations. And now, Congress is off on its August break.

President Bush’s high-stakes campaign to reach a budget compromise with Democratic leaders has been suspended for Congress’ August break, with little to show for three months of talks besides political scars on both sides.

House Republican Whip Newt Gingrich of Georgia contends the budget talks have virtually collapsed--and he blames the Democrats for it. Democrats say divisions among Republicans are the primary cause of the impasse.

“We’re fiddling around while Rome burns,” Rep. Silvio O. Conte (R-Mass.), one of the negotiators, cried in despair over the lack of any real progress in the negotiations.

Even last week’s invasion of Kuwait by Iraq may have set back the deficit-reduction process--by making it more difficult for negotiators to count on deep cuts in defense spending or to raise taxes on gasoline, particularly if oil prices begin to spiral.

Yet, both the President and key Democratic leaders have refrained from declaring the summit sessions a failure, holding out hope even in this election year that an elusive, bipartisan deficit-cutting accord can be achieved in September.

The reason: The most likely alternative--automatic federal spending cuts of $100 billion or more that would slash some federal programs by as much as 40% on Oct. 1--is considered too horrible to contemplate by the Administration and congressional negotiators alike.

Trying to keep hope alive, the bipartisan congressional leaders and Bush agreed to set a Sept. 10 deadline for agreement and a speedy timetable for approval of a package that would reduce the deficit by $50 billion in the coming fiscal year and by an unprecedented five-year cut of $500 billion.

Acknowledging the lack of progress, Rep. Bill Frenzel (R-Minn.) summed up the situation: “We’re designing a honeymoon cottage. Unfortunately, the girl hasn’t said ‘yes’ yet, so we’ve got a way to go.”

So far, however, the results offer little basis for optimism.

One factor behind the inability to reach an accord is the widespread public apathy over the deficit--even though the red-ink figure has climbed from $100 billion last January to $169 billion in mid-July, without including the cost of the massive savings and loan bailout.

While opinion surveys show some signs of rising public concern, the shift has not been enough to galvanize members of Congress into taking the kind of tough action that is needed--such as raising taxes or cutting pet spending programs.

And there has been no domestic or foreign shock to jolt the lawmakers into casting their reticence aside. “There is no sense of crisis in the land,” said Sen. Wyche Fowler Jr. (D-Ga.), one of the negotiators.

Last May, when Bush convened the budget summit and hinted that he might support some limited tax increases, Democrats urged him to go on nationwide television to outline the gravity of the problem.

But the President declined, insisting that he would address the nation only when he could endorse a bipartisan agreement to narrow the budget gap.

Key Democrats contend that without jawboning from the White House to intensify pressure on Congress, there is no way they could persuade a majority of lawmakers in the House and Senate to support them. Only the President can lead on the issue, they say.

Bush’s advisers, however, are worried that he will receive the political blame if he becomes identified with painful solutions while the Democrats keep their distance on taxes and program cuts.

The President also is faced with a sizzling revolt in his own ranks after his decision to reverse himself and declare that some tax increases might be needed to tackle the budget dilemma.

As a result, Bush has remained ambivalent. In Washington, he meets regularly with Democratic leaders and seeks their cooperation. On the campaign trail--in order to keep his conservative followers happy--he has blasted the Democrats as big spenders.

But the Democrats also have been schizophrenic. While some of their negotiators, such as House Budget Committee Chairman Leon E. Panetta (D-Carmel Valley), have been eager to engage the Republicans by offering their own budget plan, Senate Democrats generally have played a waiting game, expecting to improve their bargaining position through delays.

Still others, such as Sen. Robert C. Byrd (D-W. Va.), chairman of the Senate Appropriations Committee, and his House counterpart, Rep. Jamie L. Whitten (D-Miss.), seem concerned primarily with holding onto their turf--and are resisting major spending cuts or changes in the process.

Senate Majority Leader George J. Mitchell (D-Me.) is reported to be the chief proponent of a hang-tough posture in the closed-door negotiations, a stand that often is echoed publicly by Fowler and Senate Budget Committee Chairman Jim Sasser (D-Tenn.).

Mitchell’s reasoning is that the growing size of the deficit, together with fast-rising estimates for resolving the S&L; crisis, will put added pressure on Bush and his Republicans to offer the Democrats a better deal on tax increases and other parts of a budget package.

In contrast, Panetta has been urging Democrats to start putting “real numbers” on the bargaining table as the only way to get practical results from the stalled negotiations.

But once the Republicans leaked details of their latest proposal--which called for highly unpopular increases in beer, wine and liquor taxes--Panetta had second thoughts about advancing a high-risk plan of his own.

“We did not pledge that every time the Republicans slit their wrists, we’ll slit ours,” he said. Democrats also feared that any proposal they made before the current recess would be picked apart by special-interest groups before negotiators could defend their plan.

Despite the schism in GOP ranks--and the Democrats’ inability to agree even on an opening counteroffer--negotiators on both sides remain confident that it will not take them long to find a way to reach an accord once they achieve the political will.

Bush has suggested shifting the summit talks in late August or early September to his tranquil hideaway at Camp David, Md., the same spot that former President Jimmy Carter took the leaders of Israel and Egypt to make peace, to encourage domestic harmony on the budget.

House Speaker Thomas S. Foley (D-Wash.), one of the key players in the talks, has endorsed the idea, and last week Foley renewed his expressions of optimism that the two sides will be able to reach an agreement in the next two months.

To Foley, the real deadline for any accord will be Oct. 1--the day that the automatic spending cuts mandated under the Gramm-Rudman balanced-budget law would take effect if there is no agreement on how to trim the deficit more gradually.

If no deal is possible, however, Congress and the President may finesse the issue this year by revamping the deficit targets and again deferring the deadline for balancing the budget--in essence a political cop-out.

Foley already has hinted that Congress might postpone the Gramm-Rudman deadline for a month if the negotiators seemed to be making progress.

His Republican counterpart, House Minority Leader Robert H. Michel of Illinois, agrees that only the threat of an imminent deadline will get Congress moving.

“You don’t get a lot of members’ attention around here until you’re on the precipice,” Michel said.