Part of Tax Cut Might Fund War

The Senate, anxious about the uncertain costs of war with Iraq, approved a measure Friday that would take $100 billion from President Bush’s $725-billion tax cut proposal and use it to help pay for the military operation.

The 52-47 vote was the first legislative setback for the tax cut that Bush says is needed to stimulate the economy. But the Senate later turned back a far more serious challenge from a bipartisan coalition that proposed slashing the tax cut to $350 billion.

Bush’s plan was being debated as part of an annual budget resolution, which sets revenue and spending targets for the coming fiscal year -- a benchmark congressional decision that has been all but eclipsed by the war in Iraq.

The Senate acted after the House passed a budget resolution Friday morning that would make room for Bush’s entire economic growth plan, as well as the spending increases for defense and homeland security that he wants. Bush, in a written statement, praised the House for advancing his domestic agenda even as the war in Iraq proceeds.

“As we engage in action to ensure freedom and security, it is imperative that we stay focused on important domestic priorities, including creating jobs and strengthening economic growth at home,” Bush said.

The Senate planned to finish work on its version of the budget resolution next week. The two chambers then will try to reconcile their differences, producing a resolution that serves as the blueprint for detailed tax cut and spending legislation written later this year.

Critics of Bush’s tax cut plan said they would continue trying to scale it back.

“I’m not dead yet,” said Sen. John B. Breaux (D-La.), a co-sponsor of the failed amendment to trim the tax cut to $350 billion. But he acknowledged that defeat of the amendment was a key vote that will be hard to reverse.

The House version of the budget -- and the blueprint initially put before the Senate -- included no money for the war with Iraq and its aftermath. Republicans said the money would be added later, after the administration makes a formal request for the revenue.

Sen. Russell D. Feingold (D-Wis.) sponsored the amendment to take $100 billion from the tax cut for a war fund. He said it would be irresponsible to pass a budget with a big tax cut, large deficits and no provision for the war’s expenses.

“When we are facing a war, the budget must reflect it,” Feingold said. “We cannot go along as if this were a time for business as usual.”

The amendment passed with support from 47 Democrats, four Republicans and one independent.

But one of the Republicans -- Majority Leader Bill Frist of Tennessee -- voted for the amendment at the last moment for procedural reasons. By doing so, he gained the right to call for another vote on it next week, giving GOP leaders time to lobby for its defeat.

The three other Senate Republicans supporting the amendment were John McCain of Arizona, Lincoln Chafee of Rhode Island and Susan Collins of Maine.

Approval of Feingold’s amendment took many lawmakers by surprise. Most had been focusing on the battle over the amendment to more than halve the tax cut. Sponsoring that amendment with Breaux was Sen. George Voinovich (R-Ohio), who said the government could not afford to lose more revenue at a time of burgeoning deficits and heavy war costs.

“It’s too risky; it’s too irresponsible,” Breaux said of Bush’s tax cut. “In these times, I would suggest the right course of action would be to be a little more conservative.”

But Treasury Secretary John W. Snow and Commerce Secretary Don Evans have lobbied heavily to keep most Republicans in line behind the full Bush plan. A smaller package, they argue, would do little to stimulate the economy.

“We need to be very bold in our response to the flagging economy,” said Senate Finance Committee Chairman Charles E. Grassley (R-Iowa).

In the end, the Breaux amendment was doomed not by lawmakers who back the bigger tax cut, but by those who question whether any tax reduction should be approved, given the growing deficits and the Iraq war.

Many Democrats initially were willing to vote for the $350-billion amendment as the lesser of two evils. But when, in the course of the roll call, it became clear that the amendment would not pass, they switched their votes, and the amendment failed, 62 to 38.

California’s Democratic senators split on the amendment. Barbara Boxer voted for the $350-billion tax cut; a spokesman said she believed it was a reasonable amount that would provide relief for middle-class taxpayers. Dianne Feinstein voted against the amendment because she opposes adding to the deficit at this time, a spokesman said.

Boxer and Feinstein voted for the amendment to trim the tax cut by $100 billion to create a war fund.