House, Senate GOP Near Deal on Spending

Even as short-term fiscal disputes threatened Monday to bring the government to a halt, House and Senate Republicans neared agreement on a long-term plan to overhaul spending and balance the federal budget by 2002.

The far-reaching plan required House-Senate compromises on tax cuts, a $500-per-child tax credit, welfare reform, Medicare, slashing government and more. The plan--parts of which would be retroactive to this tax year--would put the GOP stamp on a single, voluminous blueprint to control spending and cut back the federal role in American life.

Compromises already established in the budget plan, known as the reconciliation bill, include:

* A $500-per-child tax credit for couples with incomes of $110,000 or less and single filers earning less than $75,000. The final figures reflected the Senate position, rather than House Republicans’ more generous proposal to give the credit to households earning up to $200,000.

* A 50% cut in the capital-gains tax for assets sold by individuals, which would be retroactive to Jan. 1, 1995, reflecting the House position rather than the Senate proposal. Indexing to shield investors from paying taxes on the portion of their gain caused by inflation would be allowed in three years. The Senate was prepared to forgo indexing to save money; House members sought to allow it next year.

* Abandoning a House-endorsed proposal that would have eliminated a 1993 law that in effect raised taxes for affluent Social Security beneficiaries.

The emerging reconciliation bill, which may be unveiled in its entirety as soon as today, reflects careful political strategy in addition to policy priorities.

For example, such calculations played a role in the decision of when a $500-per-child tax credit might take effect. It is tentatively set for Oct. 1, 1995, a date that ensures taxpayers will reap one-fourth of the annual amount--$125 for the last quarter of 1995--in the tax returns due next April.

“If they don’t do the family tax cut retroactively [to 1995], then a lot of people won’t know it’s there until April, 1997--and that would be after the elections,” one analyst pointed out.

And Republicans on Monday were leaning toward removing welfare reform from the bill and putting it into a new piece of legislation dealing with that topic alone. The purpose would be to force President Clinton--who has identified with the issue of welfare reform--either to accept or reject a GOP plan apart from broader budget politics.

Clinton has expressed reservations about certain House-sponsored welfare provisions that would add stringent requirements affecting teen-age mothers and other recipients.

“Mr. President, will you get with us and get tough and get this nation going?” asked Rep. Bill Archer (R-Tex.), chairman of the House Ways and Means Committee.

“President Clinton uses welfare reform just like he used tax cuts--as an election device,” Archer added Monday. “The very man who pledged to get things done is now the man who stands in the way.”

The White House is likely to find much unpalatable in the reconciliation bill, including the $245-billion tax cut and specific requirements affecting the working poor, Medicare and Medicaid.

In that sense, this week’s furor over the debt limit and a spending bill to fund the government temporarily is a prelude to the larger battle, “a bump in the road,” according to Scott Hodge, a budget expert at the conservative Heritage Foundation.

In contrast, the seven-year reconciliation plan “is what the entire debate is about,” Hodge said. “It is the principal vehicle for balancing the budget, reforming Medicare, cutting taxes and turning Medicaid into a block grant.”

Times staff writers Colleen Krueger and Elizabeth Shogren contributed to this story.