GOP Leaders Back Budget, Bush Tax Plan

Times Staff Writer

Republican leaders on Thursday pushed both chambers of Congress to pass a federal budget that would make room for the $725-billion, 10-year tax cut plan the White House has proposed to stimulate the economy, moving quickly to build on President Bush's wartime stature to promote his domestic agenda.

The House took up a budget resolution that accommodates Bush's tax cut and other priorities, after GOP leaders apparently quelled a rebellion among moderate Republicans who had complained the measure cut too deeply into popular social programs. The House worked into the night to finish work on its version of the resolution, which sets government revenue and spending targets for the fiscal year that starts Oct. 1.

In the Senate, GOP leaders were increasingly optimistic that they could thwart an amendment to their budget resolution that would slice Bush's tax cut to $350 billion. Bush allies have kept all but two or three Republicans from backing the alternative, and Democrats have apparently failed to provide the unanimous support they would need to prevail.

Congress' budget debate has been overshadowed by the onset of war in Iraq. But the resolution that emerges from Congress could chart a course that will shape fiscal policy for years after the shooting stops.

The Senate was expected to pass its version today. The two chambers then will have to reconcile differences to produce the final plan, which sets the general parameters for detailed tax and spending bills to be drafted later this year.

Economic Policy Tested

The battle over the tax cut included in the resolution is a crucial early test of Bush's economic policy because if Congress scaled it back to $350 billion, it would doom the cornerstone of the White House economic growth plan -- its proposal to eliminate taxes on dividends. Abolishing those taxes -- perhaps the plan's most controversial element -- would cost $396 billion.

The House and Senate resolutions backed by GOP leaders would give Bush most of what he wants in tax cuts and increased spending for defense and homeland security. But congressional Republicans -- especially in the House -- were less willing than Bush to forgo the party's traditional efforts to balance the budget.

Bush's budget would run in the red for years. The Congressional Budget Office has estimated that Bush's proposed tax cuts and spending plans would produce $1.8 trillion in budget deficits over the next 10 years. The resolution drafted by the House Budget Committee, in contrast, was designed to eliminate the deficit in seven years. To do so, it called for tough spending cuts in programs other than defense and homeland security.

The committee's resolution initially called for $467 billion in savings over 10 years in mandatory spending programs known as entitlements -- including more than $200 billion from Medicare, $111 billion from Medicaid and $15 billion from veterans' benefits. It also called for a 1% cut in spending in other programs unrelated to defense or homeland security.

Conservatives who remain committed to balancing the budget applauded the measure. But other Republicans, including powerful committee chairmen, howled in protest.

"I don't like this budget," said House Appropriations Chairman C.W. "Bill" Young (R-Fla.).

Spending Cuts Dropped

Enough Republicans threatened to vote against the committee version of the resolution that GOP leaders were forced to retreat on some of the spending cuts. They agreed to drop proposed Medicare savings and to earmark more money for veterans' benefits. While those changes appeased some moderates, they irritated conservatives because they meant that the budget would not be balanced for nine years, instead of the original seven.

Republican leaders urged all factions to vote for the budget despite their misgivings, saying their concerns may be addressed in later negotiations with the Senate. And in a final pitch, GOP leaders urged balky colleagues not to deliver a defeat to Bush just as he is commanding the U.S. war effort.

"A budget being turned down on the brink of war does not bode well for the president," Rep. Ray LaHood (R-Ill.) said, summarizing the leaders' pitch made at a closed-door meeting of House Republicans. "It looks pretty embarrassing."

The Senate, meanwhile, looms as the biggest hurdle to Bush's tax cut plan because that chamber is so narrowly divided -- with 51 Republicans, 48 Democrats and one independent who usually votes with the Democrats.

Five Republicans have said they opposed a tax cut as big as Bush has proposed -- or opposed acting on any tax cut at this time. However, that has not yet translated into a majority for the alternative amendment to set the tax cut at $350 billion.

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