- The Washington Times - Wednesday, May 2, 2001

The White House and congressional budget negotiators agreed yesterday on an 11-year, $1.35 trillion tax-cut plan, but struggled in discussions to limit spending for fiscal year 2002.
While Congress must next work out the details and pass that tax-cut plan, President Bush declared victory, despite seeing his proposed 10-year, $1.6 trillion plan cut by more than 15 percent.
"This is a great day for the American people and the American taxpayer," Mr. Bush said from the White House Rose Garden.
"Im absolutely convinced well be able to fund the tax cuts," Mr. Bush said, adding, "I suspect I am going to have to remain diligent over the next year to keep the spenders in check."
He congratulated Democratic and Republican lawmakers who helped reach the compromise, which enjoys the support of the Republican leadership and enough Democrats to make passage likely. The president said their cooperation was a positive sign for future legislative issues.
"You all deserve great credit," Mr. Bush said. "You have proved we can work together to do whats right for the American people."
The tax-cut agreement ends weeks of negotiations between the White House, Senate Republican leaders and a group of conservative Democrats headed by Sen. John B. Breaux of Louisiana.
"Were delighted," said Nick Calio, the administrations liaison to Congress. "Its a huge amount of tax relief for the American people and it is going to be achieved by a good bipartisan vote."
House Speaker J. Dennis Hastert, Illinois Republican, quickly backed the plan.
"Its a big victory for the president," said Mr. Hasterts spokesman, John Feehery.
Conservative Democrats were also supportive.
"Everybody wins," Mr. Breaux said immediately after a telephone conversation with Mr. Bush yesterday afternoon.
Sen. Max Baucus, Montana Democrat, called the proposal "encouraging news."
But Senate Minority Leader Tom Daschle, South Dakota Democrat, said while Mr. Breaux had done well to reduce the size of the tax cut from the $1.6 trillion Mr. Bush had proposed, the plan is still too large.
"I will not support it," Mr. Daschle said.
Specifically, the deal would allow a tax cut of $1.25 trillion from fiscal year 2002 through 2011, with an additional $100 billion "economic stimulus package" for fiscal years 2001 and 2002. While some have suggested the $100 billion could come in the form of a rebate, others, including Senate Finance Committee Chairman Charles E. Grassley, Iowa Republican, said the money will probably be used to accelerate the tax cut proposed by Mr. Bush.
Senate Majority Leader Trent Lott said he believed the figure would not be enough to "do all that the president has asked for," but that Senate Republicans will support the deal and try to pass additional tax cuts in smaller bills.
Mr. Breaux and about a dozen other conservative Democrats and Republican liberals had said during the Senates debate of the budget that $1.25 trillion was the largest tax-cut plan they could support.
Sen. Lincoln Chafee, who had declared against the presidents bigger tax-cut plan, was one of those dozen and said he was pleased that negotiators had stuck with the 10-year $1.25 trillion number, but had questions about the $100 billion stimulus package.
"Stimulus to what? The economy is doing well," the Rhode Island Republican said. Still, Mr. Chafee said, "Ill have to see how it plays out."
Conservative Republicans were not pleased, but appeared ready to support it nevertheless.
"I dont like it. Its not enough," said Sen. Kay Bailey Hutchison, Texas Republican. But asked whether that meant she would change her vote, she said, "probably not, but I havent seen the whole deal yet."
Stephen Moore, president of the Club for Growth, said the importance of the size of the tax cut is being overstated.
The real question is whether Congress later this month will lower the top two marginal rates from 39.6 percent and 36 percent to 33 percent and eliminate the estate and gift tax.
"Conservatives are getting rolled on spending. Thats why its so important to get the tax-cut victory," Mr. Moore said.
But it is by no means clear what will be in the tax package the budget deal would allow.
Mr. Grassley has met twice with fellow Republicans on the Senate Finance Committee to discuss options and plans a meeting today with Mr. Baucus and other Democrats on the committee.
"I want to do it in a way that is bipartisan," Mr. Grassley said. He said his priorities are an across-the-board rate cut, a repeal of the estate and gift taxes, tax breaks for married couples, and an increase in the child credit. Mr. Baucus, Sen. Phil Gramm, Texas Republican, and others on the committee echoed that sentiment.
The House has already voted to approve legislation addressing all those issues, but its bills have a combined value of nearly $1.5 trillion over 10 years.
Some have suggested backing off an outright repeal of the estate tax, or dropping a proposal to lower the top marginal tax rates, exactly the direction many conservatives want to avoid.
Conservatives are also concerned with the level of spending negotiators are considering.
Sources close to negotiations predicted that spending talks will settle on $670 billion in discretionary spending for fiscal 2002, about a 5.5 percent increase over fiscal 2001. House Republican leadership aides said the number would be closer to $667 billion, or about a 5 percent increase.
"Were still far apart, but were getting there," Senate Budget Committee Chairman Pete V. Domenici, New Mexico Republican, said yesterday morning.
The House in March approved a budget providing $661 billion in discretionary spending, following the 4 percent increase proposed by Mr. Bush.
The Senate, however, approved in April nearly $28 billion more in discretionary spending in 2002, plus $500 billion more in entitlement spending over the next decade.
There has been general agreement among Republicans in the House and Senate budget negotiations that the nearly 8 percent discretionary spending increase that the Senate had approved was too large. But finding a compromise between House conservatives, who would not mind freezing spending at the 2001 level, and their more liberal Senate colleagues has proven difficult.
Still, some agreements have been reached. For example, negotiators are likely to leave intact a Senate decision to allow up to $300 billion over the next decade to be spent on reforming Medicare, including adding a prescription drug benefit to the old-age health care program, according to Republican aides.
Similarly, negotiators are likely to accept a Senate-approved plan that would increase spending on the Commodity Credit Corporation by about $60 billion through 2011, the aides said.



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