New outline of deficit plan takes shape Congress negotiates without guidance from the president

October 12, 1990|By Karen Hosler and Richard H. P. Sia | Karen Hosler and Richard H. P. Sia,Washington Bureau of The Sun

WASHINGTON -- The long-sought five-year deficit-cutting plan finally began to take shape yesterday as House and Senate committee members put together an array of options from which their colleagues may ultimately choose.

Sharp partisan differences remained -- most notably on the high-profile question of whether there should be a trade-off between a tax increase for the wealthy and a tax break on capital gains.

Democratic leaders were also predicting privately that the process would not be completed by the Oct. 19 deadline and that Congress might have to remain in session until a few days before the Nov. 6 elections.

If the deadline is not met, Congress could approve stopgap funding, but that would set up another showdown with President Bush like the one last weekend, when Mr. Bush vetoed temporary funding and shutdown government services.

Various alternatives being developed behind closed doors yesterday appeared to be more alike than different, and all were refinements of the original budget agreement Mr. Bush reached with congressional leaders Sept. 30.

For his part, Mr. Bush -- trying for the third consecutive day to work his way out of a rhetorical tangle on the tax trade-off controversy -- said he would prefer to sidestep the issue entirely.

Trying to push a trade-off between tax rates and capital gains is "a waste of time because I just don't think it can get through both houses of Congress," Mr. Bush told one of at least three gatherings of Republican lawmakers yesterday at the White House.

Some GOP House members who attended the first meeting yesterday morning reported that the president had said he would support their plan of raising the income tax rate on the wealthiest Americans to 31 percent, from the current 28 percent, if the rate applied to profits from the sale of assets, or capital gains, was dropped to 15 percent from 28 percent.

That position seemed to reflect yet another reversal on the issue by the president since Tuesday morning, and the White House went to great lengths yesterday to straighten out the confusion, including providing written excerpts of the president's remarks to the lawmakers yesterday.

"One of the phenomenons of group meetings [between the president and lawmakers] is people hear what they want to hear," said presidential spokesman Marlin Fitzwater. "I think we just made a mistake" in not clearing things up earlier.

Mr. Bush, who has suffered a drop in his public opinion ratings because of the chaotic struggle with Congress over the budget deficit, became the subject of open derision this week because of his apparent flip-flops on the tax question.

"We can't get too upset about this because that is the process," Mr. Fitzwater said. "It's a very public one; it's not very pretty."

But as the budget process has worn on, the White House objective has become more clearly focused on simply getting the job done -- even if that has meant jettisoning pet proposals, such as capital gains, to avoid controversy.

Mr. Bush and his aides indicated yesterday that they find particularly attractive a so-called "bare-bones" budget proposal drafted by Representative Dan Rostenkowski, D-Ill., chairman of the House Ways and Means Committee, and cleared by the committee Tuesday night.

That plan excludes some of the most unpopular features of the original budget summit agreement rejected by Congress -- such as an increase in the tax on home heating oil -- and it diminishes the impact of cuts in Medicare benefits.

It is also excludes the most partisan proposals from both sides of the aisle, remaining silent, for instance, on raising income taxes on affluent Americans or providing growth incentives to business.

"It does seem to preserve some as pects of the bipartisan agreement, and thus it will give us something to build around," Mr. Bush said.

Some observers believe that when all the grandstanding is over, a proposal very similar to that offered by Ways and Means will pass.

Still, Mr. Rostenkowski worked yesterday with the Democratic majority on his committee to fashion a Democratic alternative that would be considered first on the House floor.

That proposal would increase the top income tax rate on wealthy Americans to 33 percent, from the current 28 percent, and raise the so-called minimum tax rate to 25 percent from 21 percent.

A capital gains component of some sort might be added today, Mr. Rostenkowski said, but it would not be nearly as generous as the plan advocated by House Republicans at the White House yesterday.

The Democratic alternative would impose a 10 percent surtax on individuals whose taxable incomes exceed $1 million, would limit the cut in Medicare benefits to about $10 billion from the $30 billion proposed in the budget pact, and would cut the gasoline tax increase to 3 cents a gallon from the 10 cents a gallon of the earlier agreement.

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