House Democrats Hammer Out Deal on Spending Curbs : Congress: Plan is aimed at winning votes of conservatives as budget showdown nears. Clinton’s aides concede that defeat would be devastating.

House leaders and conservative Democrats reached agreement early today on a new procedure designed to curtail federal spending, raising hopes for passage of President Clinton’s $496-billion deficit reduction package in a major congressional showdown only hours away.

An elated Speaker Thomas S. Foley, joined by Rep. Charles W. Stenholm (D-Tex.) and Rep. Timothy J. Penny (D-Minn.), announced the agreement, reached after days of negotiations.

“This is a very positive development,” Foley said.

The outcome is expected to help pass the President’s troubled budget measure by picking up crucial votes of wavering Democrats when the massive bill to raise taxes and trim spending comes to a vote later today.

Foley said the agreement “does build momentum” toward gathering the votes the Democrats will need.

“This is a major, significant change regarding the budget process,” Stenholm said.

Penny, another top conservative, said: “We’ll do what we can to get the votes” to pass the deficit-reduction bill.

The agreement does not guarantee that spending will be restrained, but it does put pressure on the President and lawmakers to do so. Under the mechanism, spending targets would be set each year for Social Security, Medicare and the rest of the government’s rapidly expanding benefit programs, which together account for half of the federal budget.

If a target is exceeded, the President would have to propose paying for the excess with tax increases, spending cuts or both--or with borrowing, which drives up the deficit.

Congress would then have to vote on his proposal, or one of its own, officials said.

Clinton worked the phones late into the day Wednesday to gain support for his budget plan.

White House officials conceded privately that failure to pass the budget bill in the House would deliver a devastating blow to an Administration already staggering from a series of self-inflicted wounds.

“We realize the whole presidency is on the line now,” said Rep. Charles B. Rangel (D-N.Y.). “This presidency is going to be made or broken in the next couple of weeks, and I want to make certain it’s not broken in the House of Representatives.”

White House officials used somewhat less dramatic language in public but acknowledged privately that the vote is critical.

“We’re finally starting to climb out of the toilet, and we’ve got our fingers up to the rim,” one senior White House aide said.

Winning, on the other hand, could mark the beginning of another of Clinton’s much-vaunted comebacks--or so his aides hope.

The bill in question would enact Clinton’s budget plan, which is aimed at reducing the size of the federal deficit by $496 billion over the next five years. It would raise taxes by a net $250 billion during that period--one of the largest increases in U.S. history--and reduce spending for mandatory benefits and other direct-spending programs by a net $87 billion.

Most of the political controversy over the bill has come from Clinton’s proposed new energy tax, which would hit middle-class taxpayers. The tax would cost roughly $17 per month for an average family once it is fully in place, according to Treasury estimates.

Although some House Democrats have called for a delay in the vote, White House officials repeatedly ruled out any such talk, arguing that a delay would merely make Clinton look weaker and would not, in the end, rally any extra votes.

“We’d just get killed all weekend,” one Clinton adviser said.

By the time he left his office for dinner Wednesday, Clinton had called some two dozen House members, aides said, adding that they expected him to call still more during the evening.

Clinton met in the morning with members of the Congressional Black Caucus, some of whom have threatened to vote against the budget because it would cut benefit programs too deeply.

“Until it’s done, there’s a little bit of a problem everywhere,” Stephanopoulos said. “It’s all about balancing.”

Administration vote counters said earlier Wednesday that of the 256 Democrats in the House, some 20 were certain to vote against the budget. Another 30 to 40 were considered wavering--including many House freshmen, who have not yet had to cast such a difficult vote.

Because two House seats are vacant, a majority in the chamber is currently 217 votes.

In the search for votes, Clinton went so far as to call at least three moderate Republicans asking for support. The effort seemed in vain. Rep. Christopher Shays of Connecticut, one of the Republicans called by Clinton, predicted House Republicans would be unanimous in opposing the budget, and most Democratic vote counters agreed.

In addition to reducing spending for mandatory benefits, the budget bill would freeze spending on other programs, thereby forcing a $102-billion reduction in outlays for defense, foreign aid and domestic spending.

The remainder of the deficit reduction would be accomplished by lower interest rates leading to lower payments on the national debt.

The bill would also increase the earned income tax credit, which provides cash rebates to working families with income under $29,000. The increase is part of Clinton’s pledge to ensure that any American who works full time will have an income above the poverty line.

The Congressional Budget Office and the Administration estimate that 75% of the tax increase in the bill would hit taxpayers with incomes over $100,000. Chiefly, the bill would accomplish that by raising the top-bracket rate to 36% for couples with incomes above $140,000 and up to 39.6% for those with taxable incomes above $250,000.

The energy tax, known as a BTU tax because it would be levied on the heat content--measured in British thermal units--of fuels, has become the center of the debate in both the House and Senate, said Rep. Vic Fazio (D-West Sacramento), a member of the House leadership.

“The real effort (by Clinton’s opponents) here is pretty clear, that that’s to beat this BTU tax,” he said. “This is not about further spending cuts. It’s not about entitlements. It’s about the BTU tax.”

About 25 House Democrats met privately Wednesday with Sen. David L. Boren (D-Okla.), who has threatened to kill the BTU tax with his pivotal vote on the Senate Finance Committee. They fear casting a difficult and risky vote for the tax, only to have it die in the Senate.

Even if Clinton can prevail in the House, he still faces strong opposition in the Senate, particularly on the energy tax. In a television interview Tuesday evening, Senate Majority Leader George J. Mitchell of Maine predicted that the bill would pass but said it would have to be amended to ensure the energy tax did not harm U.S. exporters--a demand from Sen. John B. Breaux (D-La.), who wields a key vote on the Senate Finance Committee.

Times staff writer Karen Tumulty contributed to this story.