A crucial band of Senate Republicans and Democrats is pushing for tax cuts less than half the size President Bush seeks to stimulate the economy, the most concrete sign yet that the White House will not get all it wants for its cornerstone domestic initiative.
About a dozen centrist Democrats and Republicans -- who hold the balance of power in the narrowly divided Senate -- have met for weeks to craft an alternative to Bush's economic growth plan, which would cut taxes by $725 billion over the next decade. Worried that Bush's plan would prove too big a drain on federal revenue, the centrists are expected to propose a tax cut in the range of $350 billion.
"It seems to be a number that is comfortable," said Sen. George Voinovich (R-Ohio).
Both plans would cover a 10-year period.
The centrist proposal will send a strong signal to the White House that, despite weeks of lobbying by Bush and his allies to build support for his economic plan, the appetite among some lawmakers for tax cuts is spoiled by growing concern about ballooning budget deficits and the potential costs of war with Iraq.
Some Republicans say their concern about the deficit and war costs has grown so much they now think Congress should wait until after any military conflict with Iraq before deciding the size and shape of a tax cut.
"I'm increasingly thinking the right decision may be to not support any plan until the fiscal situation is clearer," said Sen. Susan Collins (R-Maine). She said she was worried that a $350-billion tax cut now could be the worst of both worlds -- too small to jolt the economy, but still a big drain on federal revenue.
But most moderate Republicans say they still support some cuts to stimulate the economy, just not as much as Bush has proposed. "We need to do something," said Sen. Olympia J. Snowe (R-Maine), a leader of the bipartisan centrist group. "But we have to have a sense of proportion about what we can do."
The issue is heating up this week because the House and Senate budget committees are set to draft the annual budget resolution, which sets the federal government's spending and revenue targets for the year. That resolution sets general fiscal parameters, with the details filled in by specific tax and spending bills passed later.
The House panel is expected to approve a budget resolution today that includes almost all of the $1.6 trillion in tax cuts Bush wants. That includes the $725 billion that is in the economic growth plan, along with other proposals, such as an expansion of tax-free savings accounts. The House, a bastion of Bush loyalists, is expected to approve that plan with little change.
But the outlook for the package is cloudy in the Senate, where the centrists are crucial to Bush's success.
The discussions among the centrists so far have focused on the overall size of the tax cut, not its components. However, many -- including Voinovich, Collins and Snowe -- have opposed including Bush's plan to eliminate taxes on dividends, estimated to cost $396 billion.
"People are concerned about the size of the deficit," said Sen. John B. Breaux (D-La.), another leader of the centrist group.
But Senate Budget Committee Chairman Don Nickles (R-Okla.) said he was concerned that slashing Bush's proposal in half would not achieve the aim of reducing the deficit if Congress does not also rein in spending.
One possible strategy for Senate Republican leaders is to try to pass a budget resolution that makes room for the full Bush tax cut, while noting it can be scaled back later by the specific tax and spending bills. That could help win votes from skeptics like Collins by essentially postponing the decision on the tax cut's size and scope.
But Snowe wants to confront the issue in the debate over the budget resolution, saying it will be harder to scale back expectations later. "This train is moving out of the station," she said. Snowe wants the centrists to send a letter to Senate GOP leaders this week stating how much the tax cut has to be scaled back to win their votes for the budget resolution.
Voinovich said he believed it was important to build bipartisan support now, as the nation prepares for war while Congress squabbles over several domestic issues.
"People are looking in on us right now, and partisanship is ruling the day," said Voinovich. "If we put together a bipartisan budget, members can create a good feeling in the country."