House OKs Bush Budget Resolution

Republicans in Congress finally muscled President Bush’s budget plan to the finish line Wednesday, as the House approved a resolution that all but guarantees Congress will pass a $1.35-trillion tax cut later this year.

The Senate is expected to follow suit today.

The House vote, 221 to 207, was split deeply along party lines--dashing Bush’s hope that he could rally bipartisan support. The Senate vote also may be less bipartisan than the administration had hoped.

But final passage of the budget resolution still will clear the way for Congress to carry out Bush’s fiscal priorities: the biggest tax cut in 20 years and a slowdown in the growth of government spending.

Bush and his allies hailed the budget, which sets broad spending and revenue goals, as a signal of a sea change in fiscal policy.

“The American people can take heart that tax relief is one important step closer to reality,” Bush said after the House vote.

But Democrats denounced the budget, saying its landmark tax cut is recklessly large and it shortchanges education, Medicare and other domestic priorities.

“This is the day Republicans give up on fiscal responsibility,” said House Minority Leader Richard A. Gephardt (D-Mo.).

Only six House Democrats, including Gary A. Condit of Ceres, voted for the budget, while three Republicans voted against it. Other than Condit, California’s House members voted along party lines.

While today’s Senate vote will conclude a surprisingly tortuous process for approval of the budget plan, it is only the beginning of the more difficult task of filling in the details.

“It’s not the end,” said Senate Majority Leader Trent Lott (R-Miss.). “It’s the kickoff.”

Indeed, members of the Senate Finance Committee already have begun talks on how to craft the $1.35-trillion, 11-year tax cut, including the thorny question of which parts of Bush’s request for a $1.6-trillion reduction to drop or pare back.

The committee, which like the Senate as a whole is evenly split between Democrats and Republicans, is expected to make changes in the bill that trim benefits to the highest income brackets.

Sen. Charles E. Grassley (R-Iowa), the Finance Committee chairman, is floating a proposal to cut the top income tax rate from 39.6% to 36%--not the 33% top rate Bush had proposed.

“I haven’t seen the votes for 33% in the Senate,” Grassley said.

The budget resolution calls for the $1.35-trillion tax cut to be phased in by 2011, with $100 billion to take effect this year and in 2002 to stimulate the economy.

The plan would provide $661 billion, the amount Bush requested, for discretionary spending--the part of the budget controlled by annual appropriations. That includes the Pentagon and most domestic programs other than Social Security and Medicare.

For Medicare, the budget allots $300 billion over 10 years--about twice as much as Bush requested--for reforming the program and providing a new prescription drug benefit. The budget also makes room for Congress to pass legislation to expand access to health insurance.

However, the budget’s spending targets are nonbinding, and lawmakers from both parties predicted that Congress would end up exceeding $661 billion. Indeed, the budget explicitly allows Congress to spend far more on defense--an unspecified amount to be provided after the Pentagon finishes its top-to-bottom review of the nation’s defense needs.

Democrats complained that the budget shortchanges education--allowing increases only enough to keep pace with inflation at a time when Bush and members of both parties have been arguing for investing more for education.

Republicans said the budget makes room for bigger increases but leaves it to the Appropriations Committee to set spending priorities within the overall target figure.

Concerns about education funding undercut support for the budget among Democrats in the Senate, which approved an earlier version of the budget by a bipartisan majority that included 15 Democrats.

Some of those Democrats--including Sens. Dianne Feinstein of California and Thomas Carper of Delaware--have said they will vote against the final budget because its spending levels are too austere.

Despite those likely defections, White House and Republican leaders expect to hold on to enough centrist Senate Democrats to pass the measure. Sen. John B. Breaux (D-La.), a leader of the centrist faction, and Sen. Ben Nelson (D-Neb.) refused Wednesday to say how they would vote, but head-counters in both parties assume they will support the budget--and bring along a handful of other Democrats.

“I think the die is cast,” conceded Senate Minority Leader Tom Daschle (D-S.D.).

Meanwhile, members of the Senate Finance Committee are preparing to act on tax cut legislation as early as Monday. Grassley has been working with Sen. Max Baucus (D-Mont.) to draft a bipartisan bill.

Grassley met with committee Republicans Wednesday but ran into criticism of a plan he had developed with Baucus to revise Bush’s proposal to slash income tax rates, including the plan to limit the upper-bracket rate cut to 36%.

The committee is also considering ways to scale back the cost of repealing the estate tax by phasing it out more gradually than Bush wants, increasing capital gains taxes on inherited assets after they are sold and dropping a companion provision to eliminate gift taxes, which apply to items in excess of $10,000 a year.

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Times staff writer Edwin Chen contributed to this story.