Bush's shifts leave budget in confusion Congress befuddled by vacillations on tax provisions


WASHINGTON -- President Bush continued yesterday to send conflicting signals on whether he would accept an income tax rate increase for high-income Americans, further befuddling lawmakers trying to draft into law the provisions of last weekend's budget agreement.

Mr. Bush, who said Tuesday morning that he might agree to such an increase in return for a tax break on capital gains -- only to back away from that stand later in the day -- refused to clarify his position when quizzed yesterday morning.

"Let Congress clear it up," he told reporters while on a campaign swing through the South.

Meanwhile, presidential aides, who initially confirmed reports 11 from Republican senators claiming to have persuaded Mr. Bush on Tuesday afternoon not to support any rate increase, reversed themselves as well.

"Our position is we're looking for common ground," White House press secretary Marlin Fitzwater told reporters traveling with the president aboard Air Force One. "We're talking to various members [of Congress]. We aren't going to say what our position is on any specific item."

The president's public indecisiveness clearly irritated Democratic leaders -- and even left a few Republicans privately rolling their eyes.

"We don't know who to deal with," said Sen. Wyche Fowler Jr., D-Ga., referring to the Democrats now hastily trying to fashion tax and spending bills that can be enacted into law by Oct. 19.

"Until the president pulls his party together, it's going to be very difficult to do anything," he said.

The Senate Finance Committee canceled yesterday's session when its reportedly furious chairman, Sen. Lloyd Bentsen, D-Texas, tried to figure out what to do next. He had decided to scrap plans to increase the top tax rate in exchange for a cut in the capital gains tax rate -- but little else, it seemed, was certain.

"I had the deal all worked out until the president changed his position on this," said an obviously irritated Mr. Bentsen.

The finance panel's counterpart, the House Ways and Means Committee, found its job similarly complicated by the president's vacillations.

Chairman Dan Rostenkowski, D-Ill., also had planned to propose a cut in the tax rate imposed on profits from the sale of such assets as stocks, bonds and real estate -- known as capital gains. Mr. Rostenskowski's version would have exempted from taxation that part of an asset's increased value caused by an increase in inflation. He had intended to couple that change with an increase in the top tax rate.

After meeting with Mr. Bush yesterday morning, however, Mr. Rostenkowski dropped all mention of capital gains and income tax rates. Instead, he drafted a "bare-bones" tax plan that resembled parts of the original budget summit agreement rejected last week by the House and eliminated some of the original agreement's elements.

The Rostenkowski plan, which the full Ways and MeanCommittee agreed last night to send on to the Budget Committee for further action, would reduce cuts in Medicare benefits to about $50 billion, from the $60 billion proposed in the summit agreement.

It also would exempt home heating oil, manufacturing processes that use petroleum as well as petroleum used in the production of livestock feed from the proposed 2 percent tax on refined petroleum products.

It would trim the proposed gasoline tax rise to 9 cents per gallon from 10 cents. And the list of luxury items to be subjected to a 10 percent surtax would be expanded to include airplanes.

In order to make up the loss of revenue from these changes, the Ways and Means Committee plan would drop the business tax incentives that had been the president's favorite part of the package.

In the midst of the general confusion yesterday, some observers said they were astonished by the president's inability to get his message across.

A lobbyist with close ties to the White House said that the vivid image of a gang that couldn't talk straight "looks awful."

"This town can stand scoundrels and thieves, but it can't stand incompetence," he said.

After being rebuffed by House Republicans on the initial budget agreement the president reached with congressional leaders, Mr. Bush has turned increasingly to the Democrats to provide him his margin of victory.

Aides say the president has adopted the pragmatic view that with only three weeks remaining before the fall elections, the objective is to come up with tax and spending legislation that accomplishes his basic goal of cutting the deficit but still attracts enough support to pass.

"We are seeing the price we pay for divided government," observed Sen. Warren B. Rudman, R-N.H. He warned that, despite the Democratic majority in Congress, Mr. Bush doesn't dare turn his back on his own party interests without risking his re-election prospects in 1992.

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