Sides 'Narrowing Gap' as Deficit Talks Go On : Budget: Bush has invited the negotiators to the White House for a morning meeting today. That may be a hint of a breakthrough.


Democratic and Republican negotiators, struggling to overcome their long-standing budget differences, appeared to be moving closer Sunday to an agreement that would make a significant dent in the federal deficit.

"They are narrowing the gap," said one official close to the negotiations. "There's a long way to go and it could still all fall apart, but I see grounds for optimism."

In a hint of a possible breakthrough, President Bush, who was scheduled to return here from Helsinki at about 9:45 p.m. EDT Sunday, has invited the negotiators to the White House for a morning meeting today. Officials said the session could be cancelled if they do not have significant progress to report, but as of Sunday night they were still planning to meet as scheduled.

House Speaker Thomas S. Foley (D-Wash.) and Senate Majority Leader George J. Mitchell (D-Me.), who have stayed away from the meetings as long as President Bush is absent, were expected to join the group today. There was also a chance Bush might briefly join the talks after landing Sunday night.

Budget bargainers--including White House Budget Director Richard G. Darman, Treasury Secretary Nicholas F. Brady and more than a dozen lawmakers from both parties--have set a target of cutting spending and raising taxes by enough to slash the fiscal 1991 deficit by $50 billion and to save roughly $500 billion over the next five years.

As Administration officials and congressional leaders entered the third straight day of almost nonstop meetings, it was not clear whether they could achieve such an ambitious goal.

In a day of intense back-and-forth bargaining, Democrats were moving closer to the GOP position that the Pentagon budget should not be hacked abruptly during the current Persian Gulf crisis, sources said. Democrats had originally proposed as much as $15 billion in military cuts next year, while Republicans wanted to hold the reductions to only about $4 billion. Both sides, however, were still looking at ways to achieve substantial military cuts over the next few years.

Meanwhile, said aides who spoke only on condition they not be identified, the two parties were looking at about $10 billion in cuts from benefit programs such as Medicare and farm subsides. When the talks began on Friday, Republicans proposed more than $15 billion in such cuts, while Democrats suggested reductions limited to just over $7 billion.

Lawmakers, however, were having difficulty working out ways to satisfy White House demands that any budget agreement must include mechanisms to ensure that it can be enforced over a five-year period.

As negotiators continued to work into the evening, other major hurdles also remained. Without an agreement, the deficit for the fiscal year that begins on Oct. 1 is expected to soar to as much as $250 billion.

Both parties have proposed raising taxes and fees by roughly the same $25 billion next year, but they continued to have widely different ideas about how to hit that target.

Democrats favor raising income tax rates for the wealthy to go along with boosts in taxes on alcoholic beverages, tobacco and energy consumption, while Republicans proposed a variety of revenue raisers, including tax increases for wine and beer and limits on state and local tax deductions. They also insisted that a cut in taxes on capital gains must be part of any package.

The talks, moved to this isolated site 10 miles from Capitol Hill to keep reporters and lobbyists away, are being held in a large room that normally serves as the officers' bar.

But lawmakers have done everything possible to make themselves feel at home. The club and its adjacent buildings have been transformed into a small-scale imitation of the Capitol, with Democratic and Republican cloakrooms, separate buildings to meet behind closed doors, computers to crunch numbers, facsimile machines and an extensive telephone network.

Not everything has gone according to plan, however. After going until almost midnight Friday, the talks broke up unexpectedly about 10 p.m. Saturday night when a fire alarm forced everyone to evacuate the building. According to one aide, a musician attending a long-scheduled wedding held in the sprawling complex inadvertently set off the alarm.

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