New Deficit Plan Nears Senate OK : Budget: Bush appears willing to sign a companion funding measure to end shutdown of federal agencies.

The Senate late Monday neared expected ratification of a new $500-billion budget plan approved hours earlier by the House. President Bush was believed willing to sign a companion funding measure needed to end the weekend-long shutdown of many federal agencies.

The budget plan essentially revives the overall deficit-reduction targets set by White House and congressional negotiators in the “budget summit” agreement that was rejected by the House last Friday.

But the new plan junks provisions in the earlier accord detailing Medicare cuts and new tax increases on items ranging from gasoline to beer. Instead, Democratic-run congressional committees would be given wide leeway in drafting the specifics of any spending cuts and tax hikes.

Largely in response to citizen outcries, the committees are expected to soften Medicare cuts called for in the original plan. They also are likely to shift more of the tax burden onto upper-income taxpayers.

As the Senate moved toward a vote on the new plan, congressional and Administration officials said that they were close to agreeing on the compromise stopgap funding bill that would enable shuttered federal agencies to reopen and would avoid layoffs today of thousands of federal employees.

Democratic leaders indicated that they were willing to agree to slightly lower domestic spending and slightly higher defense spending while the stopgap measure would be in effect.

Earlier, Republican lawmakers had urged that Bush veto the stopgap bill if it did not contain a provision requiring about $1.3 billion in across-the-board spending cuts for the next 12 days. That is the time Congress intends to give itself to pass implementing legislation for the new budget plan.

The House rejected such a provision in approving a stopgap bill early Monday.

Bush vetoed an earlier stopgap measure last Saturday morning and selectively shut down much of the government in a move aimed at pressuring Congress to approve a new deficit-reduction plan.

White House Press Secretary Marlin Fitzwater said Monday afternoon that “we’ll send no signals” on whether Bush would sign the stopgap measure until after the Senate had voted on the new deficit plan.

But a senior White House aide glumly speculated that “we’re going to have to swallow it” because of the behavior of rebellious House Republicans, who helped sink the original package, which Bush had promoted heavily in a nationally televised appeal.

House Speaker Thomas S. Foley (D-Wash) said Monday night: “I am optimistic that this can be resolved tonight, or early in the morning, and that this unnecessary and artificial crisis can be ended.”

Senate Republican and Democratic leaders also said that Bush appeared to offer no objection to the new deficit-reduction plan.

However, Sen. Wyche Fowler Jr. (D-Ga.), who has represented Senate Majority Leader George J. Mitchell (D-Me.) in budget negotiations, said that “all signals from the White House have been weak, spasmodic and intermittent the last few days.”

As he struggled to work out an agreement to speed consideration of the budget matter, Mitchell told colleagues Monday night that prompt action was imperative.

Alluding to federal employees who face being sent home from work today if no operating funds are approved, Mitchell said: “We’re not just dealing with numbers but with individual human beings and their families--their hopes and fears and concerns.”

Fowler and other Senate leaders were optimistic that the plan would be supported by most of the 55 Democrats and by less than a majority of the 45 Republicans.

“I believe we are going to pass it with substantial Republican votes,” Fowler said. “Then we are going to roll up our sleeves and go to work on reconciliation”--budget jargon for the process of reconciling the plan’s vague money targets with specific tax increases and program cuts.

Sen. Pete V. Domenici (R-N.M.), ranking minority member of the Senate Budget Committee, said that he, Senate Minority Leader Bob Dole (R-Kan.) and a number of other Republicans would vote for the plan’s outline “because it moves the process along.”

Domenici said that the current plan “maintains the basic framework” of the original budget package approved by White House and congressional negotiators.

However, Domenici said after a GOP caucus that a number of other Republicans will vote against it because they believe that implementing committees will make unacceptable changes in the original plan’s details, which were widely supported by GOP senators.

Domenici said that he is drafting a letter in which Republican senators would declare that they would not support implementing legislation unless it met certain tests.

There could be no “smoke and mirrors”--that is, ostensible cuts unlikely to produce savings, he said. Further, he declared, final laws would have to provide the full $500-billion in deficit-reduction over five years and revenue increases could not exceed the $118.8 billion outlined in the plan’s blueprint.

Moreover, cuts in Medicare and other entitlement programs would have to total at least $107.4 billion. And spending-cut enforcement mechanisms and budget process reforms spelled out by the budget negotiators would have to be included, Domenici said.

Sen. Phil Gramm (R-Tex.), co-author of the Gramm-Rudman deficit-reduction law that helped force production of the current plan, said that he would vote against the revised version.

“It’s a promise, not a program,” he said. “It’s easy to pass a promise. It’s tough to pass a program.”

In a related development, Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.) said that he believes the final package will raise income taxes on top-bracket payers in exchange for lowering the tax on capital gains, or profits from investments.

Bentsen said that the change would be part of a Democratic effort to make the tax increases more equitable for low- and middle-income payers, who would be hit disproportionately hard by proposed tax hikes on gasoline, alcoholic beverages and cigarettes.

“You just can’t have a package that hits the average family that much,” he said.

A deal on capital gains faltered in the recent budget talks when Administration negotiators resisted Democratic demands to raise the income tax rate on the wealthiest taxpayers to 33% from 28%. The Administration reportedly refused to go above 31%.

Sen. Robert W. Kasten Jr. (R-Wis.) said that he and most other Senate Republicans and Bush are opposed to raising marginal income tax rates under any circumstances.

“And in my discussions with the President and (his chief of staff, John H.) Sununu, they have been opposed to that trade, too,” he said.

Staff writers David Lauter and Michael Ross contributed to this story.