Senate Passes Budget; Bush Tax Cut Slashed

In a blow to the cornerstone of President Bush’s domestic agenda, the Senate voted by a surprisingly wide margin Friday to approve a budget that would slash his proposed $1.6-trillion tax cut to about $1.2 trillion.

Bush and his GOP allies were forced to accept the smaller tax cut after failing to persuade a handful of moderate Republicans and conservative Democrats to back the White House plan. The administration was hoping to cobble together a Senate coalition that would deliver an unequivocal victory to a new president who has insisted that the $1.6-trillion figure was “just right.”

But with that setback for Bush came a rare, if unbidden, display of bipartisanship: The vote was 65 to 35, with 15 Democrats, including California’s Dianne Feinstein, crossing party lines to join all 50 Republicans in voting for the budget.

And even at the reduced level, the tax cut embraced by the Senate was far larger than anyone dreamed politically possible just a few months ago. “Democrats saying we want $1.2 trillion [in tax cuts]--that’s a big change,” said Sen. Phil Gramm (R-Texas).

Along with the $1.2-trillion tax cut, which would be spread out over 10 years starting in 2002, the Senate budget would provide an immediate $85-billion tax rebate this year, aimed at stimulating the slowing economy.

Bush and his lieutenants looked ahead Friday, saying they would try to regain some lost ground during the long legislative process still required to enact the tax cut. Bush noted that the House last month passed a budget plan incorporating his tax cut.

“The fact that both houses of Congress have committed to provide significant relief is good for the American people,” Bush said after the Senate vote. “I applaud today’s action and congratulate the Republicans and Democrats who helped make it happen.”

GOP leaders said they hope the legislation to implement the tax cut will clear Congress by Memorial Day.

Friday’s vote capped a tumultuous week of Senate debate that provided a window onto the precarious balance of power in Washington. It showed how Democrats can flex considerable muscle in a Senate split 50-50 between the political parties. But it also demonstrated how centrists in both parties can hold sway.

The centrists proved as influential as either party’s leadership in shaping the outcome of Friday’s vote. The bipartisan group of moderates pushed the $1.2-trillion tax cut, objecting to Bush’s strategy of trying to muscle his proposal through the Senate with few, if any, concessions.

“In a 50-50 Senate, bipartisanship . . . is a necessity,” Sen. John B. Breaux (D-La.), the leader of the centrist faction, said after Friday’s vote. “The White House understands that better than it did before.”

As approved by the Senate, the budget resolution makes room for $1.18 trillion in tax relief from 2002 to 2011. And the $85-billion rebate for this year was an increase from the $60 billion Republicans talked about earlier.

The House version of the budget includes $1.62 trillion in tax cuts over 10 years, with no rebate for this year. Differences in the bills will be worked out in a House-Senate conference committee after Congress returns from a two-week recess in late April.

At issue is setting broad spending and tax targets for the federal fiscal year that begins Oct. 1. Separate tax and appropriation bills will have to be approved later this year to actually implement the budget, and Congress often overrides the targets set by its budget resolution.

Specifics of the tax cut also are addressed in those bills. Bush, for instance, wants an across-the-board cut in income tax rates; Democrats argue that greater relief should be provided to those in lower tax brackets. Bush wants to eliminate the estate tax; Democrats argue it should be reduced, not ended.

Still, the Senate vote on the budget resolution was an important political and legislative milestone for the Bush presidency. It made clear that the Senate will be the crucial bottleneck for Bush’s initiatives even if the House, where Republicans have more control, can whisk his policies through on party-line votes.

Bush’s tax cut proposal had been in trouble in the Senate for months. Two moderate Republicans, James M. Jeffords of Vermont and Lincoln Chafee of Rhode Island, quickly criticized it as too large. Only one Democrat, Zell Miller of Georgia, supported it, leaving Bush at least one vote shy of a majority. Still, GOP leaders decided to bring to the Senate floor a budget plan that included the full $1.6-trillion tax cut.

The plan’s political troubles became obvious Wednesday, when Jeffords and Chafee joined Breaux at a news conference to endorse a $1.2-trillion compromise. Later that day, the Senate voted to slice $450 billion from the Bush tax cut and shift the money into education programs and reducing the national debt. Republican leaders vowed to turn that vote around, but after two days of lobbying by Vice President Dick Cheney, other top White House officials and GOP congressional leaders, they came up empty-handed.

As Friday’s vote approached, the Republicans considered one last effort to try to boost the tax cut to $1.4 trillion. But ultimately they decided not to risk it.

While some GOP leaders hailed the bipartisan outcome, others acknowledged that it came in spite of their efforts to eke out a 51-vote majority for the Bush plan.

“The administration tried to secure additional votes for a higher figure,” said Assistant Majority Leader Don Nickles (R-Okla.). “We didn’t have the votes to pass $1.6 [trillion]. We would have if we could have.”

In the crucial roll call, Feinstein initially voted against the budget, then switched to support it. “She felt that we had reached a fair bipartisan compromise,” said Feinstein spokesman Howard Gantman. Sen. Barbara Boxer (D-Calif.) voted against it.

Other Democrats who voted for it included several who face reelection in 2002: Max Baucus of Montana, Jean Carnahan of Missouri, Max Cleland of Georgia, Tim Johnson of South Dakota, Mary Landrieu of Louisiana and Robert Torricelli of New Jersey.

Along with Feinstein, Breaux and Miller, other Democrats supporting the budget were Evan Bayh of Indiana, Thomas Carper of Delaware, John Edwards of North Carolina; Herbert Kohl of Wisconsin, Blanche Lambert Lincoln of Arkansas and Ben Nelson of Nebraska.

Senate Democratic leaders said the outcome was a warning to Bush that he would have to take a more bipartisan approach to dealing with the Senate.

“We have said from the beginning that if [Bush] would work with us, we could reach a bipartisan compromise,” Senate Minority Leader Tom Daschle (D-S.D.) said. “He chose not to. He got beat.”

But many Republicans argued that the setback was more tactical than substantive. They said whatever Bush lost in the Senate debate pales in comparison to the change in the Democrats’ position: Last year, party leaders backed no more than $250 billion in tax cuts. After Bush became president, they called for tax cuts of $750 billion, then $900 billion. On Friday, 15 Senate Democrats went even higher.

“From the president’s point of view, things are moving very well and moving in his direction,” said Bush spokesman Ari Fleischer.

Indeed, some liberal Democrats said their party ceded too much too soon in the tax debate. “Democrats are going way too far,” said Sen. Tom Harkin (D-Iowa). “To a large extent, we started way too high in a compromise.”

Both sides agreed that the debate amounted to the latest dramatic test of how the Senate will handle deeply partisan matters with its 50-50 party split. Indeed, the timing of the final vote demonstrated how precarious the balance of power is.

Republican leaders, thinking every vote might be needed, scheduled the final roll call for 2:30 p.m. EDT Friday to await the return of Sen. Jim Bunning (R-Ky.). The former major league pitcher had traveled to Philadelphia for a ceremony at which his old uniform number was retired by one of his former teams, the Philadelphia Phillies.

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*Times staff writers Edwin Chen and Greg Miller contributed to this story.