Dole Links GATT Help to Tax Cut : Politics: Incoming Senate GOP leader wants the White House to support a capital gains break. Panetta calls such an exchange for backing the global trade pact unlikely.

Incoming Senate Majority Leader Bob Dole suggested Sunday that he would be more inclined to support the Clinton Administration’s effort to ratify a world trade pact if the White House endorses the longtime Republican goal of reducing the capital gains tax.

Dole (R-Kan.), appearing on ABC-TV’s “This Week With David Brinkley,” said he had raised the prospect of such a deal in a meeting Saturday with White House Chief of Staff Leon E. Panetta, Treasury Secretary Lloyd Bentsen and U.S. Trade Representative Mickey Kantor.

Panetta responded later Sunday that Dole wasn’t likely “to get a commitment from us that we’re going to suddenly support a capital gains tax cut,” particularly in connection with the trade agreement.

Appearing on CNN’s “Late Edition,” Panetta said the Administration was nevertheless “making good progress” in its bid to win Dole’s support for the global accord negotiated under the General Agreement on Tariffs and Trade.

Also on Sunday, Dole, Sen. Orrin G. Hatch (R-Utah), who is expected to be chairman of the Judiciary Committee, and three prominent Republican governors said in TV appearances that the incoming GOP House and Senate majorities should make tax and budget cuts their priority rather than seeking a controversial constitutional amendment to put prayer back in public schools. This appeared to be a rebuke to incoming House Speaker Newt Gingrich (R-Ga.), who pledged to bring a prayer proposal to a vote by July 4.

The GATT accord is a major immediate hurdle for the beleaguered Administration, which is seeking bipartisan support for the agreement. President Clinton, cutting short his Hawaii vacation by half a day, returned to Washington on Sunday to work for passage of the pact. The toughest fight appears to loom in the Senate, where Sens. Ernest F. Hollings (D-S.C.) and Jesse Helms (R-N.C.) lead the opposition.

Administration sources privately expressed confidence Sunday that they will have the votes to steer the massive trade accord through the House and Senate. But support from Dole appears to be crucial.

Dole said he favors the concept of the expanded trade agreement but has specific concerns. Nonetheless, he added, “we’re getting close to an agreement.”

At the same time, he acknowledged that he had suggested to Bentsen that he wanted the Treasury secretary’s commitment to cutting capital gains taxes before he agreed to back the GATT accord. A Bentsen aide said Dole had not found a receptive audience.

“As far as the secretary’s understanding, the two are not linked,” said Bentsen spokeswoman Joan Logue-Kinder. “He told him we would look at all tax considerations on the table and that whatever we did (in terms of tax reduction) would have to be paid for.”

She added that any debate on tax cuts is expected to come well after the GATT vote, which is scheduled for a special session of Congress next week. Panetta said the Administration has opposed previous initiatives to reduce capital gains taxes because such proposals favor the wealthy.

Republicans have long sought to lower taxes on the profits from stocks, bonds, real estate and other investments. They maintain that such cuts would spur economic growth and create jobs.

The trade agreement, negotiated by 123 nations, would cut tariffs on manufactured goods by an average of 40% around the world and extend copyright and other protections to everything from the production of pharmaceuticals to musical recordings. It would also pave the way for banks, insurance companies and other financial service firms to operate in foreign countries.

Dole said his major concern was the creation of a World Trade Organization as a successor to GATT, which now governs world commerce. The new organization would mediate trade disputes among members, and members would be bound by its decisions. Some critics of the accord say that it would erode the sovereignty of the United States.

Dole said that during his meeting with Administration officials, “I proposed a way to get out of the World Trade Organization if we have these arbitrary and capricious adverse decisions coming from this secret panel.”

But Logue-Kinder countered that the United States has had similar arrangements under GATT and other bilateral agreements without the adverse effects predicted by GATT opponents. She said that because the United States already has relatively open markets, in most instances where there has been some kind of arbitration it is the United States that has invoked the procedure.

Meanwhile, Rep. Bill Archer (R-Tex.), who is expected to be chairman of the tax-writing House Ways and Means Committee, said earlier on the ABC program that he favored a capital gains tax rate “somewhere between 15% and 20%.” The current rate is 28%.

Economic reform was also on the minds of three Republican governors who agreed Sunday that the new GOP congressional leadership will be on more solid footing with voters if it pushes to trim spending rather than pursue a mandate for school prayer.

The chief executives, all considered moderates on social issues, appeared on NBC-TV’s “Meet the Press.”

“The new Republican Congress needs to be very disciplined and very focused on issues that really affect people very much in their daily lives,” said California Gov. Pete Wilson, whose concern was shared by Gov. Christine Todd Whitman of New Jersey and Gov. William F. Weld of Massachusetts.

Hatch, who is among the Senate’s most conservative members, said that he also “would prefer to solve the economic problems first.” He added that he doesn’t “believe the votes are there for a vocal school prayer amendment, but they are there for a silent prayer or reflection amendment.”

Asked about the prayer proposal, Dole also said he wanted Republicans “to engage in some other issues up front. . . . If we’re going to bring about change, we better bring up measures we can pass so the American people will get the message that we’re serious.”

Dole also differed with Helms, the incoming chairman of the Senate Foreign Relations Committee, who earlier in the weekend had said he didn’t think Clinton was up to the job of being commander in chief of the armed forces.

“My view is that he is the commander in chief,” Dole said. “I think he’s done a little better . . . with Haiti, maybe with the Mideast. I think he’s doing better all the time.”

Sen. Christopher J. Dodd (D-Conn.), who is seeking to become Senate minority leader, blasted Helms’ comments.

“This is coming close to aiding and abetting insubordination of the commander in chief” at a time when the United States is engaged in many sensitive situations around the world, Dodd said on CBS-TV’s “Face the Nation.”