Domenici, firm on deficit, defies GOP


WASHINGTON -- As congressional Republicans start to stumble in their drive to cut federal taxes, many are dismayed to discover they're being tripped up by one of their own.

Sen. Pete V. Domenici of New Mexico has been fighting a lonely battle to balance the federal budget, bemoaning the deficit spending of the past decades.

He stresses that a GOP-led tax reduction would only continue the annual shortfall in federal revenue, even with government programs being cut or eliminated, and he is determined not to let less cautious Republicans squander the opportunity to address the budget.

"This is the culmination of many years of aspirations and hopes," a jubilant Mr. Domenici proclaimed during a whirlwind round of interviews Thursday night after finally winning Senate approval of a detailed plan for eliminating the deficit.

Mr. Domenici's gruff, no-nonsense manner gave way to a broad grin: He had withstood weeks of pressure by Democrats and Republicans alike to undo his handiwork.

"We are working through some very, very tough terrain," he said, acknowledging that more battles lie ahead. "But I am convinced most people share our view that we must balance the budget first before we cut taxes."

As chairman of the Senate Budget Committee, Mr. Domenici slammed the brakes on the $350 billion tax cut passed by the House. He's turned the debate over tax cuts from how much to when -- and if. In June, he will play a leading role in negotiating those issues with the House.

"My guess is that Domenici will be controlling that debate," said Rep. Bill Orton, a conservative Democrat from Utah who serves on the House Budget Committee.

Mr. Domenici, 63, has stirred more than a little resentment among his younger GOP colleagues for slowing the momentum of what House Speaker Newt Gingrich has called the "crown jewel" of the Republicans' "Contract with America."

Such critics say Mr. Domenici -- who completes his fourth term in the Senate next year -- is stubborn, hot-tempered and stuck in old ways.

"I think Pete is not for the dramatic change that some of us in the party have committed to," groused Sen. Phil Gramm of Texas, a candidate for the Republican presidential nomination and chief Senate proponent of the House tax-cut package. "Some people have one foot on the side of dramatic change, and one foot firmly planted on the side of the status quo."

But Mr. Domenici is respected on both sides of the aisle for his sincerity and directness, and because he regularly displays the courage of his convictions.

"He is a genuine person in an arena that is not always so genuine," said Texas Republican Bill Archer, chairman of the House Ways and Means Committee and a leading tax-cut advocate. "We may disagree on many issues, but Pete Domenici is one of the few senators I feel real warmth for."

Born on a ranch outside Albuquerque to a family of Italian immigrants, he combines a Western independence with a -- of impishness. And he has been driving leaders of his party crazy for years.

In 1981, during Mr. Domenici's first stint as Budget Committee chairman, he openly defied then-President Ronald Reagan and Senate Majority Leader Howard H. Baker Jr. They wanted to rely on economic growth from tax cuts to balance the budget. Instead, Mr. Domenici put together a budget that raised taxes and curbed Social Security benefits.

With the help of Bob Dole, then chairman of the Senate Finance Committee, parts of that proposal were enacted in late 1982 in the form of a $98 billion tax increase, which Mr. Reagan was pressured into signing.

In 1985, Mr. Domenici teamed up again with Mr. Dole, who by then had become Senate majority leader. They won approval of a budget plan that denied cost-of-living increases to Social Security recipients to help shrink the deficit.

The father of eight speaks in apocalyptic terms about the danger that huge debt poses for future generations. But his tight-fistedness is blamed for his defeat in two bids for more senior Senate leadership posts.

"He was a pioneer in deficit reduction," observed Ohio Republican John R. Kasich, chairman of the House Budget Committee. "But being Budget Committee chairman gives you the opportunity to hear a lot of people speak to you at very high volume."

Despite Mr. Domenici's persistent scolding, Congress was never able to resist the huge spending increases that continued to feed the deficit throughout the Reagan era and much of the presidency of George Bush.

By the time Republicans started talking during the election campaign last year about balancing the federal budget, Mr. Domenici was determined to hold them to their word.

Former Minnesota Sen. Dave Durenberger recalled a GOP caucus last fall at which Mr. Gramm wanted all the Republicans to a sign a statement of support for seven legislative objectives, much like the House Republicans' "Contract with America." The list included a balanced budget and tax cuts.

"Nobody had seen these things before, and Pete was the only one who insisted on reading them," Mr. Durenberger recounted. "Then he announced, in that matter-of-fact way of his, that the numbers just don't add up. He wouldn't sign it."

That may have been the opening shot in Mr. Domenici's continuing battle with Mr. Gramm over the tax cuts.

"It really hurts him when the Republican tide is running in the easy direction, and he has to stand up against it," Mr. Durenberger added. "He's just as conservative as any of them, but he has this sense of responsibility."

House members got their first chance to take Mr. Domenici's measure in January, during a hearing on changing the method for determining the impact of capital gains tax cuts on the deficit.

Conservative Republicans have argued for years that such cuts should be counted as increasing federal tax revenue because they spur investment. It's called supply-side economics. House Majority Leader Dick Armey had warned shortly after the November election that Mr. Domenici "will have to learn" to count that way, too.

Instead, Mr. Domenici declared at the hearing that the new counting method "was a bad idea whose time had not yet come and we weren't going to do it," Mr. Orton recalled. "I stood up and applauded."

As he drafted his proposal this year for cutting $1 trillion from federal spending to reach a balanced budget within seven years, Mr. Domenici was under great pressure from Mr. Gramm and his allies, including Republican Whip Trent Lott of Mississippi, to include tax cuts.

But most persuasive was the political concern of his old friend, Mr. Dole, who is also seeking the Republican presidential nomination and believes he needs to be able to deliver some kind of a tax cut.

"I told him we'd find a way to do it, and he just left it to me," Mr. Domenici said.

That's how the Budget Committee chairman came up with his scheme to set aside $170 billion for tax cuts that would come from projected interest savings on the national debt if Congress finally succeeds in balancing the budget.

Mr. Gramm protested, saying the tax cuts would be too far in the future.

"If I'm elected president, I would be in the end of my second term before it takes full effect," he complained.

But Mr. Domenici's cautious approach was endorsed by the Senate last week while a proposal to match the House tax cuts was soundedly rejected.

As he heads into negotiations with Mr. Kasich and the team from the House, Mr. Domenici insists that neither side can afford to issue ultimatums. But his strong views are clear.

"The time has come to say enough: enough to the deficit, enough to red ink," Mr. Domenici told his colleagues. "This may be our last chance to balance the budget. Let's not let it slip away."

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