Conferees Move to the Brink of a Budget Deal

Senate and House negotiators late Monday night moved to the brink of agreement on a new budget compromise that would avert another government shutdown within 48 hours.

Democratic and Republican leaders even began counting votes in both chambers to see if they could muster the majorities required to pass a $500-billion deficit-reduction plan with major tax increases on the eve of the November elections.

Near midnight Monday, congressional negotiators said that they had not finally concluded an accord and scheduled another meeting today, presumably to wrap up the final details and give their formal endorsement to the budget package.

Disputes involving the size of spending cutbacks for the Medicare program and the method for imposing higher taxes on millionaires had blocked agreement during spirited weekend discussions that briefly erupted into a partisan squabble.

Asked after the break-up of a late-night meeting if the negotiators were on the verge of settling their hard-fought differences, House Speaker Thomas S. Foley (D-Wash.) replied: “Yes, I think so. It’s gone very well.”

House Minority Leader Robert H. Michel (R-Ill.) said that a deal is within reach and added: “We’re still counting votes. When you’re on the margin, you want to be sure. You don’t want this to go down again.”

In another sign of an imminent breakthrough, House Democrats called a caucus of their 258 members to test sentiment on the outlines of a Senate-House compromise that appeared to be in the offing. Senate Democrats also announced a caucus today.

Senate Majority Leader George J. Mitchell (D-Me.) said that there was no tentative agreement when the meeting of top negotiators ended shortly before midnight. But he smiled broadly and said: “We’re making good progress.”

Richard G. Darman, director of the White House Office of Management and Budget, who sat in on the talks along with Treasury Secretary Nicholas F. Brady, added: “We certainly are as close as the last time I said we were almost there.”

Republicans and Democrats apparently narrowed their differences on how much to raise gasoline taxes in a new deficit-reduction package--with a 6-cent-a-gallon increase emerging as the most likely compromise.

They reportedly were only $2 billion apart on the size of Medicare reductions and close to agreement on how to soften the impact on elderly beneficiaries, who are regarded as a potent political force.

They also decided on raising about $6 billion in extra taxes from the very wealthiest Americans, but they clashed again on just how to do it.

Leaders in both chambers began cautiously checking rank-and-file sentiment for reaction to a possible agreement that would split the difference between differing Senate and House bills and presumably would receive the support of President Bush.

With elections only two weeks away, many lawmakers were skittish about approving large tax increases for gasoline, as well as higher taxes on beer, wine, alcohol and cigarettes--levies that would have the greatest impact on middle-income and lower-income families.

But the prospect that the lawmakers might not come up with a budget plan in the waning days of the 101st Congress also alarmed those who wanted to “do something” about the deficit before going home to face the voters.

The conference committee negotiations had hit a snag Sunday when Democrats refused to go along with a Republican proposal to raise revenue on taxable income above $1 million by disallowing 8% of deductions.

The Democratic bargaining team preferred its own approach--which would have imposed a 7.5% surtax on millionaires--on grounds that it would have a uniform impact nationally and would be far easier to explain than the complex limit on upper-income deductions.

Since it is considered likely that Democrats will have to provide most of the votes in the House for any budget package, House Majority Leader Richard A. Gephardt (D-Mo.) said, the final package should have the party’s stamp on it to increase the odds of success.

That enraged White House Chief of Staff John H. Sununu, who was representing President Bush at the meeting.

Sununu, accusing the Democrats of blocking progress, angrily declared that the talks were at an impasse and left to report to the President. Congressional negotiators, however, resumed the negotiations Sunday night and Monday morning and Darman came to Capitol Hill to represent the Administration.

Despite Democratic allegations that the President was trying to protect the rich during the budget talks, the latest package includes an Administration-backed plan to raise taxes on persons with incomes above $100,000 as well as the increase on those with taxable earnings of $1 million or more.

But Republican negotiators joined top White House officials in standing behind a plan first advocated by a Democratic member of Congress--Rep. Don J. Pease of Ohio--that would raise taxes on the rich by taking away a fraction of their usual deductions for mortgage interest, charitable contributions and state-local taxes.

The “deduction reduction,” as Senate Minority Leader Bob Dole (R-Kan.) described it, would take away 4% of all deductions for those above $100,000 up to $999,000. Above that level, the “super-Pease plan” would deprive millionaires of 8% of their deductions. Medical expenses, casualty losses and interest on investment loans would be exempt, however.

“The White House seems to have drawn a line in the dirt against the surtax,” said an aide to a Democratic negotiator.

Dole said that he hopes Congress can finish work on the budget and all of its other business by Wednesday midnight and adjourn for the year. If it does not, Dole said, it may be difficult to pass another stopgap resolution to keep the government operating beyond the current deadline.