Political Quarrels Disrupt Budget Talks : Congress: GOP accuses Democrats of spreading ‘garbage’ through news leaks. Bush’s aides believe efforts to reduce the deficit are still on track.

Partisan wrangling over the impact of President Bush’s proposed capital gains tax cut disrupted the budget summit talks Friday and slowed progress toward agreement on a plan to reduce the federal deficit by $500 billion over the next five years.

Bush described the 4-month-old negotiations as “like a roller coaster, kind of up and down,” as he left to spend a weekend at his Camp David retreat. But the President reported that, despite the political furor, his top aides still believed they were “closing the gap” with congressional Democrats.

Several Republican senators expressed outrage over news reports disclosing that the GOP tax proposal would lower taxes for people with incomes above $50,000 and raise taxes for those with lower incomes.

Senate Minority Leader Bob Dole (R-Kan.) accused the Democrats of spreading “garbage” through news leaks and declared: “I am not certain we ought to continue to negotiate on this basis. Frankly, I am sick of it.”

The Democrats, charged Sen. Phil Gramm (R-Tex.), have embarked on a “concerted, partisan effort to affix blame,” saying he has been unfairly tagged with advocating unpopular changes in Medicare fees.

Senate Majority Leader George J. Mitchell (D-Me.) responded that he deplored unauthorized disclosures of budget discussions but said that Republicans had done the same thing to advance their viewpoint in the media.

In an effort to limit the benefits that upper-income taxpayers would receive from the President’s proposed capital gains tax cut, GOP negotiators now favor imposing a luxury tax on certain expensive consumer goods and a $10,000 limit on federal deductions for state and local income taxes. But the Republican plan, which GOP lawmakers defend as necessary to stimulate the sagging U.S. economy, still would favor wealthier taxpayers.

The talks, being held in seclusion at Andrews Air Force Base in an effort to preserve confidentiality, were recessed until Sunday evening after the angry outbursts. Sources close to the negotiations, however, said they doubted that the episode would doom the bipartisan attempt to achieve a deficit-cutting package.

Bush’s proposal for a drastic reduction in the capital gains tax on the profit from the sale of assets like stocks, bonds and real estate clearly remains the most divisive issue. Congressional analysts said it would reduce tax revenues by $24.5 billion over five years, but advocates contend it would create jobs, stimulate the economy and add to the government’s coffers.

Democrats said 80% of the benefits from such a tax cut would go to people with incomes above $100,000, the same Americans who have received the largest tax cuts during the last decade and have the greatest ability to pay higher taxes.

The latest Democratic offer would put a 20% surtax on incomes above $500,000 a year. It would also eliminate the current $51,300 income limit on payment of the 1.45% Medicare tax, raise gasoline taxes by 11 cents a gallon, add a 4% tax on other forms of energy and boost alcohol taxes.

The Democratic plan calls on the wealthy to sacrifice along with others who will be affected by any budget-cutting measure; it would protect those making less than $20,000 a year while raising taxes on all other income groups by $26.5 billion a year.

Unless a budget agreement is reached by Oct. 1, the Gramm-Rudman law could slash $100 billion from the $1.2-trillion federal budget, forcing government agencies to cut back their services sharply and cutting the Pentagon budget by one-third despite the crisis in the Persian Gulf. If no agreement is reached by Sept. 28, Bush plans to submit his own deficit-cutting package to Congress for a vote.

Staff writer James Gerstenzang contributed to this story.