GOP Under Pressure to Back Down on Its Tax Cut Plan : Budget: Republicans’ insistence on a $245-billion break is called key sticking point by Democrats as crucial negotiations on spending resume today.

As the White House and congressional Republicans head into a make-or-break stage of long-stalled budget talks, Democrats are turning up pressure on the GOP to back down from its proposal to provide a $245-billion tax cut as part of its plan to balance the budget by 2002.

“If you eliminate the tax cut, we could reach agreement fairly quickly,” said Senate Minority Leader Tom Daschle (D-S.D.). “The give has to be in the area of the tax cut.”

Daschle said the White House is prepared to scale back its own $98-billion tax cut proposal as both sides gear up for talks today at which the administration and congressional Republicans are supposed to swap new budget proposals. A senior Democratic aide said later that the administration likely would offer a smaller tax cut when it unveils a revised budget proposal in talks with Republicans today.

Republican sources said the GOP is unlikely to budge on the tax cut--at least not in the revised budget. But they said that the new GOP plan likely would propose restoring $70 billion or more for Medicare, Medicaid, education and other programs that the president has identified as priorities.

Sources in both parties cautioned that details of their new offers are likely to be in flux until their unveiling at today’s talks.

After meeting with congressional Democrats on their revised plan, White House Chief of Staff Leon E. Panetta said: “We will try to make a serious effort to see if we can bridge the gap.” But he declined to say exactly how.

Republicans and White House officials said that they hope the new plans will jump-start negotiations, which have dragged on without result for more than two weeks. The progress of today’s talks may also determine whether thousands of government workers are furloughed as of Saturday, when many agencies will run out of money if Congress does not approve a stopgap spending measure to replace that which expires at midnight tonight.

Republicans in the House have said they will not approve another stopgap measure, known as a continuing resolution, unless President Clinton produces a new budget proposal that eliminates the deficit by 2002, based on economic assumptions by the Congressional Budget Office--a demand that would require Clinton to find more than $350 billion in additional spending cuts over seven years.

The CBO released new economic projections earlier this week which showed that $135 billion more would be available than previously thought. The budget plan Clinton unveiled last week showed a balanced budget in 2002 but it was based on the more optimistic economic projections of the White House Office of Management and Budget.

Republicans’ seven-year budget plan, which was vetoed by Clinton, would scale back the growth of Medicare, cut taxes, turn Medicaid and welfare into lump-sum payments to states, and make scores of other changes in federal programs in order to eliminate the deficit.

Top White House and congressional leaders agreed Wednesday night to intensify their negotiations over the budget today.

Republicans said that if the administration does not show a good-faith effort to produce a budget that is balanced under CBO assumptions, it would be hard to win approval of a stopgap measure to keep the government open--especially in the House, where Republicans are more confrontational and have insisted on keeping the threat of a government shutdown as leverage to keep Clinton bargaining over a balanced-budget plan. “We can’t do a continuing resolution if they are not serious,” said House Budget Chairman John R. Kasich (R-Ohio).

An aide to the House Democratic leadership said the White House probably would not offer a detailed budget. “It will be more conceptual,” the aide said, “bigger ideas rather than dollar details.”

Another aide said the administration will argue that if Republicans insist on using the CBO’s more pessimistic economic forecasts, they will scale back their proposed tax cuts. “They will argue that the more optimistic forecasts will give you more leeway to have more of a tax cut,” the aide said. But Sen. Harry Reid (D-Nev.) cautioned that Clinton, who is due back from Paris this morning, has not made a final decision on whether to scale back his tax cut.

On the Republican side, House leaders have said publicly that the $245-billion tax cut figure is nonnegotiable. But privately many concede that they are likely to come down in further negotiations with the White House as long as they can preserve top priorities, including a cut in capital gains taxes and a $500-per-child tax credit. Even some members of the freshman class in the House, who are thought to be among the most intransigent supporters of the tax cut, are showing a willingness to compromise.

“I don’t think the $245-billion figure is magical,” said Rep. Sam Brownback (R-Kan.).

But for now, Republicans are going to stand pat and likely make no changes in their tax cut plan in their revised budget.

In another development, congressional leaders sought help on a key sticking point by asking a bipartisan group of governors to propose a compromise on Medicaid, the state-federal health care program for the poor.

Michigan Gov. John Engler and others are meeting to suggest ways to bridge the deep division between Republican plans to convert Medicaid into block grants to states and end the federal guarantee of medical assistance to the poor, on one hand, and Democrats’ desire to retain that guarantee of assistance.

A bipartisan recommendation from the governors could give both sides in the dispute the political cover they need to compromise. “It is encouraging that Democratic and Republican governors are involved,” said Sen. John H. Chafee (R-R.I.). “I’m very upbeat.”

In a separate development, the Senate on Thursday approved and sent to the White House two appropriation bills that Clinton has threatened to veto. One provides $12.2 billion for the Department of Interior and related agencies, a bill Clinton has opposed because he said it includes too little money for energy, Native American and arts programs and because it includes provisions affecting logging in Alaska and other proposals that the administration objects to on environmental grounds.

The second bill would provide $80.6 billion for the Department of Housing and Urban Development, the Environmental Protection Agency and a variety of other agencies. Clinton opposes it because, among other things, it would cut the EPA’s budget by one-fifth and eliminate his signature national service program.

The Senate also passed on an 82-16 vote a $6.4-billion State Department authorization bill that would cut $1.7 billion over five years. Democrats agreed to the cuts in exchange for deletion of a clause that would have eliminated three agencies: the Arms Control and Disarmament Agency, the Agency for International Development and the U.S. Information Agency. The bill now must be reconciled with a House-passed measure that would eliminate the three agencies.

Times staff writer Jonathan Peterson contributed to this story.