NEWS ANALYSIS : Bush Apparently Outflanked on Budget Battleground : Politics: The GOP enjoyed an early advantage, but the Democrats used superior tactics to outmaneuver the White House.

As chess players might put it, the battle of the budget apparently wound up as a Republican political debacle for one principal reason: President Bush and his GOP allies botched the end game.

When the budget summit talks began last May, Bush and congressional Republicans seemed to be in a strong position against a demoralized Democratic team. Not only was the President’s popularity at a record high, but his no-new-taxes pledge--from his 1988 election campaign--continued to be a crowd-pleaser.

The one tax change he did want--a sharp cut in the tax rate for capital gains--had passed the Democratic House in 1989 and had come within a few votes of clearing the Senate. Bush’s plea that such a move would spur economic growth appeared to have wide popular appeal.

From such promising beginnings, how did the President wind up winning almost none of the major budget provisions he wanted, endorsing the largest tax increase in history and taking a political drubbing in the process?

As the budget battle draws near a close, even Republicans are wondering how it came out this way.

The answer appears to be that, in the crucial tactical maneuvering of the final weeks, Democrats, led by Rep. Dan Rostenkowski (D-Ill.), knew what they wanted and how to maneuver to get it.

By contrast, Bush and his negotiators, shocked by House rejection of the original budget summit agreement, seemed to flounder.

Bush and his top advisers switched positions several times, projecting an image of indecisiveness at critical moments. Then, instead of uniting on a fallback position, they squabbled among themselves.

In retrospect, the White House appeared to place too much of its hopes on a badly flawed budget summit deal, worked out with reluctant congressional Democrats, that failed to get a majority of either party in the House.

Congress felt that this accord, reached Sept. 30, contained too many cutbacks in Medicare, a 12-cent-a-gallon gasoline tax increase that was far too high, and even an extra week of waiting for unemployment benefits that the lawmakers could not stomach.

Democratic congressional leaders said it was only the threat of the President’s veto--which they did not feel they had the votes to override--that prompted them to go along with a plan they did not really like.

“That first agreement enabled the question of national priorities to be brought into sharp focus for Americans to see,” said Senate Majority Leader George J. Mitchell (D-Me.). “The debate that followed has been very beneficial to . . . Democrats because I think our priorities are more in accord with a majority of the American people.”

After this halting start, Democrats got their act together in the final weeks of negotiations, knew what they wanted and how to maneuver to get it.

Rostenkowski, chairman of the House Ways and Means Committee, shrewdly put together a bill that unified the party’s disparate ranks in the House and pointed the way toward a final product that tilted toward the Democratic side.

Bush and his negotiators, by contrast, seemed to flounder after the original budget summit agreement was torpedoed by a combination of conservative Republicans and liberal Democrats in the House.

Shocked by the outcome, the President never recovered the offensive. Appearing to switch positions almost daily in the crucial mid-October period, he virtually abdicated leadership when he said: “Read my hips” and “Let Congress clear it up.”

Bush was caught between powerful forces in his party pulling in opposite directions. Some wanted him to abandon the budget talks and veto spending bills instead to attack the deficit. Others--who prevailed--urged him to keep trying for a bipartisan agreement.

At any rate, his indecision undercut a plan by Sen. Lloyd Bentsen (D-Tex.) to offer a budget trade-off pushed by many Republicans in Congress: a proposed capital gains tax rate of 23% and a 32% top-bracket income tax rate.

Despite initial indications that Bush would endorse such a move, he later called it a waste of time to pursue that course. His once-cherished capital gains tax cut was dead.

One leading Republican, however, said the trade-off was fatally wounded early in the summit deliberations when GOP negotiators emphasized they would not accept any increase in income tax rates. “We were frozen in position right out of the blocks,” he said.

Stung, Bentsen put together another package that shifted more of the tax burden to the rich, setting up a compromise with the House that carried out the Democrats’ promise to make the tax provisions more equitable to their core constituency of people earning $50,000 or less. Bush grudgingly agreed to an increase in the top tax rate to 31%--without any trade-off.

As a result, the Democrats came away relatively united while Republicans in both Houses were sharply divided over the merits of a $500-billion deficit reduction plan that the GOP President had made the most important domestic issue of his tenure.

Within the White House, disgruntled Bush aides have been pointing the finger at Budget Director Richard G. Darman and Chief of Staff John H. Sununu, saying the two men became so enamored with their role as budget negotiators that they failed to prepare Bush for the possibility that the deal they negotiated might collapse.

In the tightly centralized Bush White House, lower level staff members were not in a position to challenge a position embraced by both Sununu and Darman, Bush’s two most powerful advisers on domestic policy.

“There was no counterweight,” one White House official said.