Consensus on budget developing Senate plan draws bipartisan interest


WASHINGTON -- In yesterday's wee hours, while lights burned late on budget-obsessed Capitol Hill, the Senate Finance Committee embraced a deficit reduction plan that left even the battle-hardened believing that a resolution of the federal government's months-old fiscal crisis might be at hand.

On a 15-5 vote, Democrats and Republicans joined ranks behind a package that would raise taxes, cut spending, and, over five years, purportedly help slash the government's spending shortfall by a bit more than $500 billion. More importantly, perhaps, it promised to do so while avoiding the political shoals that sank the budget summit compromise struck two weeks ago between congressional leaders and President Bush.

"I believe it is a fair compromise," said Senate Majority Leader George J. Mitchell, D-Maine, who signed off on the budget pact.

"I'm now more optimistic that this will be worked out than I've ever been," said Sen. Bob Packwood, R-Ore., who didn't.

Needless to say, much remains to be accomplished before Mr. Bush's signature can dry on any budget-related documents.

Last weekend, congressional leaders worked among themselves to come up with a new budget plan, one laundered of specific provisions -- for example, a $60 billion, five-year cut in Medicare -- that caused a majority of Republicans and Democrats in the House to turn their backs on the original summit proposal.

Now, the race is on to implement the new agreement before midnight Friday, when the government is once again scheduled to run out of money and a massive disruption of federal services is threatened.

Thus, Congress is working overtime to finish work on the 13 appropriations bills that enable the federal government to spend money for its myriad domestic, diplomatic and military activities.

The finance panel's bill, backed as it is by Democrats, Republicans and the president, appears likely to win Senate endorsement in something close to its present form. It will thus constitute the Senate's version of how taxes and entitlements ought to be altered in the name of reducing the deficit.

But the House appears certain to approve a version that differs sharply, one unveiled Friday by Democrats who wanted to put more of their own stamp on deficit-reduction strategy. That package, in turn, was introduced on the heels of yet another plan, a middle-of-the-road proposal offered Wednesday by the tax-writing House Ways and Means Committee, the House's counterpart of the Senate Finance Committee.

Under typical circumstances, the Ways and Means plan would carry the day. But these are not typical circumstances. For one thing, the committee's chairman, Representative Dan Rostenkowski, D-Ill., is one of the architects of the Democratic plan, which would sharply increase federal levies on the better-off, while providing a number of tax breaks aimed at middle-income wage-earners. For another, few House Republicans are expected to support the "bipartisan" plan on the floor, opting instead to cast votes against it because of the taxes it would raise.

White House officials say that the House Democrats' plan would be considered sure-fire veto bait if it were sent to the president for his signature. It raises, for example, the income tax rate levied on the highest wage-earnes to 33 percent from the current 28 percent while slapping a 10 percent surtax on individuals earning more than $1 million a year. At the same time, it does provide a tax break for income from the sale of certain investments, such as real estate and small businesses. But it clearly skews the benefits of that break in favor of the middle class.

In a House-Senate conference, lawmakers and congressional staff aides expect something closer to the Senate Finance Committee's legislation to emerge, ready for the president's approval.

But each of the three plans contains major similarities: All, for instance, increase taxes on cigarettes, alcohol, wine, and luxuries like expensive automobiles. All three would count on savings from Medicare, although not the amount contemplated by the summit agreement: The House Democrats' plan and the Ways and Means plan would both look to Medicare for $43 billion worth of savings, while the Senate bill proposes almost $49 billion in savings.

And two of them -- those adopted by Senate Finance Committee and the House Ways and Means Committee -- resemble each other both in their outlines and in many of their details, suggesting that the contours of the package that will eventually become law.

The proposals of both committees avoid the question of income tax rates altogether.

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