Bush Lowers His Tax Cut Bar

President Bush bowed to political reality Wednesday and conceded that he would be unable to win congressional approval of the $1.6-trillion, 10-year tax cut that is the heart of his economic program.

But he remained hopeful that when the House and Senate finish their work the final figure will be something above the $1.2-trillion reduction the Senate has approved.

With the higher figure seemingly out of reach, the president began presenting even the Senate’s $1.2 trillion as a victory.

“We are beginning to define the parameters,” the president said to the cheering crowd in a sun-baked stadium in Metairie, La. “Out of the House came a $1.6-trillion plan, and now the Senate, somewhat reluctant, but nevertheless they passed a $1.2-trillion plan.

“Because of you all, because of the voices of America, tax relief is on the way,” the president said before flying here for a fund-raising dinner.

Even more than Bush, Republican leaders in Congress are openly acknowledging the need to scale back the $1.6-trillion bottom line for the tax cut.

Congressional negotiators--some of whom met with Bush on Wednesday for the second time in two days before the president left the capital--began formal meetings to resolve differences between the House and Senate versions of the budget resolution, which sets broad guidelines for later action on tax and spending bills.

The House measure, in addition to tacking precisely to the course Bush set on taxes, limited increases in most federal programs to the 4% raise Bush recommended. The Senate, with 50 Republicans and 50 Democrats, opted for a budget increase of 8.3%.

But on Wednesday, House Speaker J. Dennis Hastert (R-Ill.) said: “We also have to deal with reality, and we know what the Senate situation is. Probably somewhere in between is where we’re going to come out on this thing.”

The president, until now, had been adamant in his approach to cutting taxes: Neither $1 more nor $1 less than $1.6 trillion. Thus, his willingness to compromise is a concession, which some lawmakers consider long overdue, to political reality in Congress, and it marks a significant shift of strategy.

In an interview with Associated Press, Bush was more explicit than in his speech at the rally.

“I’m a practical man. I want to get it done,” he said.

“It’s going to be less than 1.6 [trillion dollars] and greater than 1.2 [trillion] and we’ve got to figure out how to make it work,” Bush said in the interview.

He urged the congressional negotiators to give priority to cutting tax rates for individuals. He offered no other suggestions about how to trim his tax plan to get it to a figure below $1.6 trillion.

A senior Senate Republican aide, assessing the White House shift, said, “By lashing themselves to the mast of $1.6 trillion, they suffered publicly” when the Senate scaled back the tax cut to $1.2 trillion. As a result, he said, “they grabbed defeat from the jaws of victory here.”

Senate Majority Whip Don Nickles (R-Okla.) told Bush in a meeting Tuesday at the White House with Republican leaders that the Senate probably could pass a tax cut as big as $1.4 trillion over 10 years.

However, four key Senate centrists--two Democrats and two Republicans who were instrumental in the Senate vote to scale back the Bush tax cut--have written to Bush urging him not to go beyond the $1.2-trillion benchmark.

In search of the tax cut number that would pass, Bush has been meeting with moderate Democrats in recent days. He had Sen. John B. Breaux (D-La.) to the White House for dinner Tuesday night; a handful of other moderate Democratsvisited the White House on Wednesday morning.

House-Senate budget talks also will determine how large a tax cut will be provided immediately to help stimulate the economy. The Senate budget made room for an $85-billion cut in 2001; the House, which acted on its budget before concern about the economy peaked, included no 2001 tax cut.

One idea being floated by Republican leaders is to focus the economic stimulus measure on cutting the capital-gains tax, which applies mostly to investment income, even though Bush did not include such relief in his tax package.

* Gerstenzang reported from Little Rock and Hook from Washington.