Budget: Frustration, Fatigue and Failure : What Washington couldn’t produce in 100 days, it needs to produce in only a few

Washington’s leaders set new records for frustration, fatigue and failure last week trying to cut the federal budget deficit. The worst may be yet to come.

Stopgap funding has allowed more time to construct a budget compromise. The goal is still to reduce the deficit with spending cuts and higher taxes. But like a child’s connect-the-dots drawing that leads to a full picture, no one yet knows precisely where the dots are or what the picture will look like.

Congress and the White House will not try again to agree on how to achieve the goal in secret summit meetings. This time, congressional committees will recommend cuts in federal programs and increases in taxes that they think will do the job.

Among the chores they face is inserting more fairness into the package. Liberal Democrats attacked it because the package that emerged from four months of summit meetings would have raised taxes 7.6% for people making $10,000 or less and only 1.7% for people making more than $200,000. Conservative Republicans helped vote the package down because it raised taxes at all.

Tuesday, Washington started over, this time with just 10 days to produce what it could not produce the first time in more than 100 days.

President Bush said he would--then later said he wouldn’t--consider higher taxes on the wealthy. In any case, he still wants the cut in capital-gains taxes he promised during his 1988 campaign.

Making that work will be harder than it once sounded. Democrats have talked of an income tax rate of 33% for the wealthy and a cut in capital gains from 28% to around 20%. Now they discover that those numbers would reduce taxes for the wealthy, not raise them. The reason is that so much of the income among the nation’s wealthy comes from capital gains and a cut in that tax would more than offset a 33% rate on high incomes.

The arithmetic can be resolved--for example, by offsetting a capital- gains tax cut with an income tax rate above 33% on high incomes--but time is short and Bush is already in Dutch with his own party over changing his anti-tax stance.

With signs that the U.S. economy may be already in recession, with nearly 200,000 U.S. troops in the Persian Gulf and a shooting war still very possible, some economists now surmise that having blown its opportunity to cut the deficit when the economy was robust, Washington may have to wait for better times.

What’s ahead? More fatigue and frustration, to be sure. Perhaps even more failure before Washington gets it right.