Both Parties Face Divisions in Budget Fight : Congress: Democrats and GOP have to resolve their conflicts before they can expect to negotiate a deal with each other.

White House Chief of Staff Leon E. Panetta Monday charged that millions of children would be harmed by Republican budget proposals, and released a state-by-state analysis seeking to show how young people would be affected by restrictions in health care, nutrition and other areas.

Republicans are saying, “you have to harm children in order to save them,” Panetta contended, whereas the White House maintains that “we should continue to invest in children for our future.”

House Speaker Newt Gingrich (R-Ga.), meanwhile, traveled to Boys Town in Nebraska to underscore his contention that private charity can do more for children than government. Boys Town, he said, shows that even with “remarkably few resources,” people can “achieve great things if they love each other enough.”

But the escalating war of words between the White House and Republican leaders Monday obscured an entirely different set of conflicts that stand in the way of a spending deal: Republicans are confronting fierce, intraparty divisions that must be bridged before the goal of a sweeping budget deal with the White House even can be considered.

These realities are taking on extra meaning this week as the House and Senate consider major spending and tax-cut bills that were designed to put a GOP imprint on a transformation of federal policy.

On Monday, the Senate Budget Committee passed a voluminous bill aimed at balancing the budget over seven years by slashing $664 billion from projected spending. In coming days, however, the legislation--known as a reconciliation bill--will be the object of internecine struggles over health care, agriculture and other issues.

“Compromises are going to be difficult,” said Carol Cox Wait, president of the Committee for a Responsible Federal Budget. “But they are as difficult within the Republican Party as they are between the White House and Republicans.”

Squabbling GOP factions may force Republican leaders to ease proposed cuts in education, agriculture and other programs to assure passage of the measure. That will set the stage for another intraparty brawl as negotiators try to resolve the thorny differences between the versions of the budget bill passed by the Senate and by the more conservative House.

Already, Republicans who disagree over abortion, environmental regulation and other social issues have stalled several of the 13 annual appropriations bills needed to finance most of the government.

“There are some good old-fashioned family discussions going on,” said Rep. Jim Nussle (R-Iowa) of the GOP’s internal divisions. “But they haven’t spilled out into the neighborhood.”

President Clinton faces painful divisions within his own party. Many Democrats remain furious with his recent statements suggesting that the tax increase that some of them risked their seats to give him in the 1993 budget deal was a mistake. Although some are unhappy with the White House, their irritation is not likely to affect the outcome of the budget debate because they do not have enough votes to prevent passage of the budget.

Yet the Administration also has scored points in the drawn-out budget fight by arguing that proposed restrictions on Medicare are too harsh. On Monday, White House officials sought to expand the strategy by mounting a campaign maintaining that GOP budget cuts take an unfair toll on children.

First Lady Hillary Rodham Clinton visited babies at a New York hospital and Panetta distributed the White House analysis of how children would be affected by GOP proposals for health care, immunization, taxes, summer jobs, nutrition and other programs.

The report said, for example, that the Republican proposals would eliminate Medicaid coverage for 4.4 million low-income children nationally in 2002, and 469,104 children in California alone.

Such programs “are investments that pay off in the future, that save money in the future,” Panetta said.

The new White House push prompted a swift GOP response, as Republicans argued that their policy prescriptions would prove far more helpful to needy kids: ‘What’s hurting children today is the welfare system that is trapping them in poverty and forcing them into schools that don’t teach them anything and permitting an environment of drugs and crime to destroy their young lives,” said Tony Blankley, spokesman for Gingrich.

Many analysts said that the current atmosphere of brinkmanship is largely for the benefit of the purists in each party, who will jump all over their leaders if they are seen as compromising too easily. Most budget experts expect the initial round of budget and appropriations bills to be vetoed, after which both sides would reposition themselves for negotiations.

“Both sides realize they have to go through some initial chest beating and bravado,” said Robert Reischauer, a budget expert who is a senior fellow at the Brookings Institution. “Once we’ve gone through this first state where each side has followed the script with care, then it will be time to compromise.”

Amid the partisan fireworks in recent days there have been some small signals of where the two sides may be willing to give. Clinton reversed field last week and said that he might be willing to accept Republicans’ seven-year time line for balancing the budget. And some House Republicans have indicated that they would be willing to compromise on the amount of savings wrung from Medicare.

Both sides have agreed that there should be a tax cut but differ on how much and who should benefit.

Still, even as the public is deafened by the high-volume argument between the White House and Republicans in Congress, GOP leaders are working sotto voce to bring their troops in line behind key budget measures.

The far-reaching budget reconciliation bill, which includes GOP proposals to curb Medicare and Medicaid growth and spending on farm programs, student loans, welfare and a host of other federal programs, moved another step closer to enactment Monday when it was approved on a party line vote of 12 to 10 by the Senate Budget Committee.

“The time is now to stop the credit card of the U.S. government and to say to all Americans it is time to balance the budget,” said Senate Budget Committee Chairman Pete V. Domenici (R-N.M.). “This is an exercise in declaring once and for all that it’s not just what we want to give our citizens, it’s what we can afford.”

The Senate is expected to take up the budget reconciliation bill--so called because it is designed to reconcile spending and taxes to the targets set in the Republicans’ seven-year budget balancing plan--on Wednesday and pass it by Friday.

As a result, Senate GOP leaders face the challenge of ensuring 51 Republican votes to pass it; with 54 Republicans in the Senate, they can afford to lose only three Republicans.

A group of about a half dozen Republican moderates have begun meeting to seek changes that would ease cuts in Medicaid growth, education and tax credits for the working poor. But any changes the leadership makes to appease party moderates risk alienating more conservative Republicans.

The House is expected to take up its version of the bill Thursday. The biggest threat to House passage of the bill is a dispute among Republicans over proposals to revamp and scale back federal subsidies to farmers. Fighting the proposals are Republicans from areas that grow cotton and rice and that have small dairy farms--areas of agriculture that critics say would be disadvantaged by the farm overhaul.

In readying that measure for House debate, Republican leaders have quietly decided to drop a tax provision--included in the GOP’s “contract with America”--that would have allowed the elderly to keep more of their Social Security benefits when they earn other income.

A spokesman for the House Ways and Means Committee said the provision had been dropped because it faced procedural hurdles in the Senate.

Sen. John McCain (R-Ariz.) said he would try to force a vote on the provision, but it would take a 60-vote majority to pass it.

Once the budget bill is passed by each chamber, it may be weeks before the House and Senate resolve the many differences between the two measures. Farm programs may be among the thorniest, if the House manages to win approval of its radical overhaul; the Senate has approved far more modest cost-saving changes.

The conference likely will reopen divisions between the moderate and conservative wings of the party over how deeply to cut taxes and for whom.

The Senate would impose stricter eligibility limits on the proposed $500-per-child tax credit for families than would the House and many conservatives wish there were no income restrictions at all.

The Senate bill also would make a much bigger cut in tax subsidies provided for the working poor through the earned income tax credit.