Congress approves $2.2 trillion budget plan


WASHINGTON - The House and the Senate passed a $2.2 trillion budget plan yesterday that would allow for tax cuts this year of up to $550 billion. But in a critical agreement designed to skirt a deep split among Republicans, key senators pledged they will not accept a tax cut of more than $350 billion.

In a strikingly public airing of the Republican divisions, House leaders lashed out at the Senate just minutes after it passed the budget agreement. They accused Senate leaders of reneging on a deal to consider larger tax cuts later this year.

"We reached an agreement face to face with Senate leaders, and I would expect that that would be more important than some secret side deal," said House Majority Leader Tom DeLay, a Texas Republican. "This goes to the heart of our ability to work together as a House and Senate."

House Budget Committee Chairman Jim Nussle, an Iowa Republican, said it was "offensive" that Senate leaders had not informed him or other House leaders of the deal before announcing it yesterday afternoon.

But even without the Senate pledge, the budget deals a serious blow to President Bush's $726 billion tax cut proposal, a cornerstone of his economic agenda, which he and Republican congressional leaders argue is critical to pulling the country out of a prolonged slump. Congress appears far less likely to keep intact the centerpiece of Bush's growth package, a provision to eliminate the taxes that shareholders pay on corporate dividends.

The Senate passed the measure 51-50, with Vice President Dick Cheney breaking the tie and just one Democrat, Sen. Zell Miller of Georgia, crossing party lines to support it. The House passed it early yesterday morning, 216-211.

Unable to overcome differences within their party, Republican congressional leaders resorted to a complex budgetary maneuver that allows both chambers to pass tax cuts of up to $550 billion, but erects a parliamentary hurdle in the Senate to any tax cut of more than $350 billion. The two sides would have to compromise before sending the measure to Bush for his signature.

Grassley commitment

On its face, the agreement appeared to give Republicans seeking a higher level of tax cuts the upper hand in negotiations later this year. It would make any final tax cut agreement up to $550 billion filibuster-proof in the closely divided Senate, meaning it would need only a simple majority - instead of a 60-vote supermajority - to pass.

But in a chamber that relies as much on personal alliances as it does on arcane rules to function, the crucial breakthrough was an oral commitment from Finance Committee Chairman and top tax-writer Charles E. Grassley, an Iowa Republican, that he would not agree to a total tax cut of more than $350 billion.

"At the end of the day, the tax-cut side of the growth package will not exceed $350 billion," Grassley said.

The budget deal faced an uncertain fate until virtually the last moment, as Republican leaders toiled to find a way to garner enough support for the measure without limiting themselves to tax cuts of less than half what Bush has proposed.

The crucial breakthrough came late Thursday, when moderate Republican Sens. Olympia J. Snowe of Maine and George V. Voinovich of Ohio agreed to support it. They did so after securing Grassley's assurance that although the budget allows a final tax cut agreement of $550 billion, he will not agree to one costing more than $350 billion.

"This is a responsible, well-balanced approach to stimulate our economy in the short term, and to protect our economy from the effects of unnecessary deficits in the long term," said Snowe, a member of the tax-writing Finance Committee.

Snowe said she trusted Grassley's commitment not to accept a tax cut larger than $350 billion.

It was the support of Snowe and Voinovich that allowed Democrats last week to slash Bush's economic growth package to $350 billion in the Senate's draft of the budget. But in the House, which last week adopted a version leaving room for the entire $726 billion tax package, leaders refused to accept the smaller cut.

Unable to bridge the gap, Republican leaders and the Senate's parliamentarian - who rules on procedural matters - devised an unusual scheme that would effectively force the Senate to limit itself to tax cuts of $350 billion but allow a final House-Senate agreement costing as much as $550 billion to clear Congress and be sent to the president's desk. But it was the deal with Grassley that rescued the bulk of Bush's economic growth package, just as it appeared doomed in Congress.

"There is not now a majority of senators in support of President Bush's top figure of budget relief," Grassley said. "The reality is that the Republican caucus is split."

House leaders bitterly attacked Grassley but said his betrayal would not stop them from pushing for as large a tax cut as possible.

The deal "violates the spirit of this budget compromise," said House Speaker J. Dennis Hastert of Illinois. But Hastert said Grassley was "irrelevant" because Senate leaders had the power to overrule him.

Republican budget writers said passing a budget with unorthodox tax-cut provisions was better than sacrificing the opportunity to set limits on how much Congress can tax and spend this year. Democrats did not pass a budget last year, and Republicans argue that hurt their efforts last year to pass key legislation, including the annual spending bills.

"It's critically important that we pass a budget," said Sen. Don Nickles, the Oklahoma Republican who chairs the Budget Committee. Without one, "spending would be rampant, we would be totally out of control."

Budget resolutions do not have the force of law, but they set limits for the tax and spending measures that Congress will consider later in the year. They can also shield legislation from Senate filibusters, which require 60 votes to overcome, allowing high-priority measures to pass with just a simple majority.

That protection is especially crucial in the closely divided Senate.

Outraged Democrats

Democrats, most of whom opposed the Republican-written budget, seemed even more outraged at the final agreement, which they said abused congressional rules in order to protect tax cuts much larger than the majority of lawmakers support.

"Whatever the fiscal situation is - big surpluses or big deficits - it makes no difference. [Republicans] are bound and determined to do tax cuts for very wealthy people," said Sen. Paul S. Sarbanes, a Maryland Democrat who sits on the budget committee. They "are prepared to twist the procedures of the institution like a pretzel in order to push through large tax cuts."

Rushing to get out of Washington for a two-week break, appropriators were struggling last night to reach a final agreement to pass a nearly $80 billion emergency supplemental wartime spending measure to fund the war in Iraq, the postwar rebuilding effort and domestic anti-terrorism efforts.

Negotiations on the measure stalled this week because of a dispute between lawmakers in the House and the Senate over $1.7 billion in pet projects the Senate inserted into the legislation.

Appropriators met all day yesterday, resolving other differences, but progressed slowly last night in whittling down the so-called "pork" projects.

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