Accord to Avert Federal Budget Cuts Seen Near

As optimistic rumors swept the capital, White House and congressional budget negotiators were reported Thursday to be moving closer to a deficit-cutting agreement that would avert a $100-billion cutback in federal outlays on Monday.

Even as the bargaining teams raced against the clock, however, Democratic and Republican sources cautioned that major issues still must be resolved before the two sides can achieve the bipartisan goal of a five-year, $500-billion deficit-reduction package.

Moreover, rank-and-file members of both parties who heard initial reports of tax increases and spending cuts already tentatively approved said that the proposals could run into a buzz saw of opposition once the package comes to the House and Senate floors.

Congressional sources said that the negotiating teams discussed a Democratic plan to raise income taxes on more affluent Social Security recipients and a Republican proposal to delay cost-of-living adjustments for those who get federal benefit checks.

President Bush’s representatives, who earlier had insisted on a sharp cut in capital gains taxes, altered their position to back a concept called “indexation,” which would exempt from taxation only that part of an investment profit attributable to inflation.

Democrats, however, insisted that indexation would still cost the government substantial revenue and advocated an increase in the top income tax rate from the existing 28% to about 33% to offset it, the sources said.

The Associated Press reported Thursday night that negotiators tentatively agreed on an 8-cent-a-gallon increase in the federal gasoline tax. The negotiators also confirmed an earlier decision to seek a 10% luxury tax on expensive cars, boats, jewelry, furs and electronic goods.

The talks were spurred by a bipartisan desire to avoid a crushing blow to government services that otherwise would take place if automatic spending cuts take effect Monday, reducing outlays on defense and many domestic programs by about one-third.

The House and Senate will meet in extraordinary Sunday sessions to consider a Democratic plan to delay cuts required by the Gramm-Rudman law to Oct. 20 and provide funds to keep the government operating when the new fiscal year begins Monday, even if there is no budget deal.

President Bush has threatened to veto any such legislation, however, to keep the heat on the negotiators to produce an accord that they have been working on for more than four months.

“We’re a little bit in the precincts of reaching a conclusion, rather than in the wrap-up stage,” said House Speaker Thomas S. Foley (D-Wash.). “A good deal has been agreed to tentatively. . . . We still hope to succeed--the odds favor it--but there’s still the possibility of failure.”

Rep. Jerry Lewis (R-Highland), chairman of the House Republican Conference, said that the negotiators appear to be “on the brink” of an agreement but still far from wrapping up the entire package.

Unresolved issues include the extent of cuts in federal benefit programs such as Medicare and the nature of the hotly debated tax provisions, he added. Rather than pushing its original capital gains proposal, Lewis said, White House officials were talking about “growth incentive elements,” without defining them precisely.

Lewis, however, said that many Republicans would have problems with the prospective final package because it appears to “tax more and spend too much” from their viewpoint.

Similarly, Rep. Ronald V. Dellums (D-Berkeley) said that the 24-member Congressional Black Caucus opposes the prospective budget agreement on grounds that it “further savages already decimated programs in housing, health care, education and job training.”

“I think both (Republican and Democratic) caucuses will have trouble swallowing this,” said an aide to a key Democratic senator. “The only way it’s going to work is if the President sells it to the American people and takes the politics out of it.”

Meantime, Bush toned down his rhetoric, after having placed the blame on Democrats for blocking a budget summit agreement in campaign appearances Wednesday. But he continued to press for a settlement before the scheduled slash in federal spending Monday.

“It isn’t too late to act,” the President said. “Don’t delay one day longer. Prove to the American taxpayer once and for all that we can deal with this impossible deficit.”

Even so, Democrats had a field day in the House, demanding that Bush stop campaigning for Republicans in the Midwest and return to Washington to deal with the budget crisis.

“If the President spent as much time raising money for the country as he does for Republicans, there’d be no deficit at all,” said Rep. Lawrence J. (Larry) Smith (D-Fla.).

GOP speakers replied in kind, with Rep. Jim Lightfoot (R-Iowa) declaring: “The amount of horse manure we’re spreading here this morning could put the fertilizer industry out of business.”

By afternoon, however, there was an atmosphere of expectation on Capitol Hill as rumors circulated that a deal had been struck, prompting Foley to deny that any agreement had been reached.

And when House Majority Leader Richard A. Gephardt (D-Mo.) announced the Sunday session, he said: “We’re still working in this summit, trying to produce an agreement. I don’t know whether there will be one or not.”

But, Gephardt added that if there is a breakthrough, both Democrats and Republicans will want to outline the details to members of Congress firsthand rather than let them read secondhand accounts in the newspapers.

House Democrats scheduled a caucus this morning to get a progress report from their negotiators on the latest developments in the budget discussions, which began last May 15 but only began to show real movement this month.