Support Grows for a Tax Trade : Deficit: As talks wear on, House Republicans endorse a possible compromise that would raise rates for rich in exchange for cuts in capital gains.

With much of the government shut down for lack of funds, congressional leaders struggled through the day Sunday to win bipartisan support for a new deficit reduction package to replace the $500-billion plan that was rejected by the House on Friday.

In a development that could break the budget logjam and reopen government offices, House Republicans overwhelmingly endorsed suggestions for a compromise that would raise income taxes on the very rich in exchange for a reduction in capital gains tax rates.

The straw vote--which came in a closed caucus called to explore GOP sentiment for striking a new budget deal with the Democrats--marked a stunning reversal of the hard-line approach that GOP leaders had taken at the negotiations that produced the earlier budget pact.

It was not immediately clear, however, how quickly any such compromise could be put together. Democratic leaders said consideration of such a tax trade-off would have to wait until congressional committees take up details of any new package later in the week.

In the meantime, the Democrats pushed a new plan of their own aimed at softening proposed Medicare cuts and shifting tax increases more toward the wealthy. But they said their own proposal would contain few specifics, leaving details for congressional committees to work out.

The Democratic plan also would reduce the extra share of Medicare costs that the program’s beneficiaries would have to pay to only $12 billion over five years instead of $30 billion--a move designed to gain crucial support of the elderly, who had protested the earlier plan.

Lawmakers on both sides of the aisle had been especially leery about angering senior citizens, who constitute a potent bloc of voters in congressional elections, now less than a month away. Last week’s plan sparked a barrage of phone calls and telegrams from the elderly.

House Speaker Thomas S. Foley (D-Wash.) expressed hope that a new budget outline would be ready for action by the House late Sunday, in time to go to the Senate for a vote today.

If a new package is adopted, the leaders then will seek to pass a separate stopgap funding measure, needed to reopen government agencies before Tuesday, when workers end a long Columbus Day weekend. Without such a resolution, most federal workers would be sent home.

President Bush successfully vetoed a similar stopgap measure on Saturday and selectively closed down a number of government operations, saying that he wanted to keep the heat on Congress to approve a new deficit-reduction plan.

His action ignited partisan warfare on Capitol Hill, as the House failed by six votes to override the veto.

Foley, who pleaded with Bush not to force a confrontation that might destroy chances for a new bipartisan budget, vented uncharacteristic fury over the veto Sunday, even as he sought to reach a new compromise with Republicans.

He accused Bush of “creating a crisis that is totally artificial,” charging that “We’re injuring innocent people” affected by the shutdown.

“It’s like saying we ought to rebuild the fiscal house of this country and he sets the House on fire for awhile to get our attention,” Foley complained.

Foley also sought to assuage rank-and-file Democratic lawmakers, who had been angered by the fact that they were left out of the 4 1/2-month-long negotiations between congressional leaders and top Bush Administration officials.

Meeting with reporters in an ornate lobby off the House floor, he pointedly noted that the new package was being drafted without any formal negotiations with White House officials--though he conceded that they were being kept up to date informally.

He also insisted that the Democrats’ new budget plan is aimed at “appealing to members of both parties. It reduces the increased cost in the Medicare program and provides a more equitable and fair distribution of taxes.”

He said the plan would contain aggregate figures for reducing spending and increasing taxes but details would be left up to committees--mainly the House Ways and Means Committee and the Senate Finance Committee.

“There’s not a dime’s worth of tax increases--not 10 cents’ worth of cuts in the budget resolution,” he said. “It allows the committees to consider these issues.”

But that is just the thing that appears to concern Republicans the most. Many minority party members voiced fears Sunday that if the details of the plan are left to Democratic-controlled committees, the final package will not curb spending enough to keep tax increases to the bare minimum.

“I’ve got reservations about referring details to my committee,” said Rep. Bill Archer (R-Tex.), top-ranking Republican on the tax-writing Ways and Means panel. “We’re out-numbered, 23 to 12.”

Added Rep. Jack Buechner (R-Mo.): “We may get a bone out of the Democrats but certainly not a five-course meal.”

As behind-the-scenes negotiations wore on Sunday night without any sign of agreement, Minority Whip Newt Gingrich (R-Ga.) pressed for a stopgap spending bill that would impose $40.1 billion in across-the-board cuts until Congress can produce a permanent budget.

Normally mild-mannered, Foley erupted in fury at Gingrich’s suggestion that Congress was blocking a deal that would allow government operations to resume by refusing to cooperate with the White House.

“Of all the people in this House, in this country, that has little claim to cooperating with his President, it is the gentleman from Georgia,” Foley declared to cheers and applause from fellow Democrats.

Within minutes, House Majority Leader Richard A. Gephardt (D-Mo.) stormed onto the floor to announce that he had been waiting for the last six hours in the office of Senate Majority Leader George J. Mitchell of Maine with Senate budget negotiators from both parties, but that no House Republican had shown up.

“I hope that someone would come from your side,” Gephardt told GOP members, “so that what the President has asked us to do for five months (and) yesterday and today--to get a budget resolution” can be done.

At their own caucus Sunday, Republicans debated whether to continue seeking a compromise with the Democrats or instead to adopt a strategy of confrontation, seeking to force Congress to enact deep spending cuts by persuading Bush to veto appropriations bills deemed excessive.

House Minority Leader Robert H. Michel (R-Ill.), one of those favoring a new bipartisan accord, asked for a show of hands on a proposal to cut the tax on capital gains to 20%--from 33% now--in exchange for boosting the ordinary income tax rate on the wealthy to 32% from 28%.

Republican leaders said the plan--which they said would reduce the deficit by $13 billion over five years--drew surprising support.

“There was at least a two-thirds majority for it,” Rep. Jim Leach (R-Iowa) told reporters later. “I think the leadership was stunned.”

In recent days, even conservative Republicans such as Gingrich, who originally opposed income tax hikes, have shown a willingness to consider such a tax swap in hopes that lower capital gains rates would help stimulate the ailing economy.

However, White House Chief of Staff John H. Sununu said Sunday that the Administration still opposes raising the top income tax rate. “We think we ought to draw the line on tax rates and not raise the rates,” he said on CNN’s “Newsmaker Sunday” program.

Sununu, obviously rankled that Gingrich had led a House GOP rebellion that helped sink the original budget compromise, noted that it was Gingrich and other Republicans who had insisted earlier on holding fast against any change in income tax rates.

“This kind of flipping at this point on some of the specific markers that were laid down is kind of surprising,” Sununu said.