As new deadline looms, negotiators work into the night on federal budget

October 23, 1990|By Peter Osterlund | Peter Osterlund,Washington Bureau of The Sun

WASHINGTON -- Just two days before the federal government was scheduled to run out of money again, congressional budget negotiators closed in on a $500 billion deficit reduction deal yesterday that would reach into the wallet of almost every American.

Participants met until late last night. Later, none would say a deal had been struck, but several said progress had been made."We're making progress," said Senate Majority Leader George Mitchell, D-Maine.

Democratic leaders prepared to unveil their handiwork before a closed-door meeting this morning of House Democrats.

Negotiators from both parties consider today's meeting a crucial test of any agreement's ability to win congressional passage. It was the House of Representatives that rejected the now-defunct budget summit compromise that had been painstakingly constructed by White House officials and congressional leaders. Without the support of a clear, even overwhelming, majority of House Democrats, lawmakers agree, any new deficit reduction agreement is certain to collapse.

"We're very, very close," said House Ways and Means Chairman Dan Rostenkowski, D-Ill. "The problem is finding the votes to support it."

Earlier in the day, negotiators had spent little of their time negotiating, instead twiddling their fingers and waiting for revenue estimates from the Joint Tax Committee. They reconvened in the evening after sleep-deprived congressional tax panel staffers had generated projections about the impact ,, the latest proposals would have on the federal deficit.

With the talks suspended, senior Democratic negotiators tested potential deals on rank-and-file Democrats in the House.

Legislation providing the federal government with operating funds is to expire at midnight tomorrow. Through clenched teeth, budget negotiators expressed hope that the president would not be asked to sign another stopgap money bill, the fourth since September, without a budget agreement to accompany the request. And so, rumors of a deal flew like fallen leaves through the corridors of the Capitol.

Democrats considered dropping their call for a surtax on millionaires, replacing it instead with a GOP proposal to limit deductions. "I think the surtax issue is solved," said a Republican negotiator, Sen. Bob Packwood, R-Ore., suggesting that Democrats had abandoned the surtax.

Speculation then ran rampant that the two sides had hit on a tentative deal.

Under the terms of that alleged agreement, according to senior Republicans close to the talks, the top income tax rate would be increased to 31 percent, up from the current 28 percent. Income from the sale of such investments as stocks and real estate, more popularly known as capital gains, would be taxed at the present 28 percent. The alternative minimum tax, designed to ensure that high wage-earners with sizable deductions pay a minimum tribute to the federal government, would increase from 21 percent to 23 percent.

The gasoline tax, now 9 cents a gallon, would go up by 6 cents. Those with incomes exceeding $99,000 a year would not be able to exclude 4 percent of the value of their deductions from taxation; for those with annual incomes over $1 million, the figure would be 8 percent.

Medicare expenditures, the rumors held, would be reduced by $45 billion during the next five years. Last night, however, negotiators were said to have furiously debated the size of those cuts, with Democrats insisting on a trim closer to the $42 billion level approved by the House and with Republicans demanding something within $2 billion or $3 billion of the $49 billion level backed by the Senate.

Earlier, House Majority Whip William H. Gray III, D-Pa., had fueled the notion that a deal had been struck when he told reporters that negotiators were "working the numbers" on a deficit plan and that, if the "numbers" were acceptable, Democrats would meet in closed-door caucus this morning to discuss terms of a deal.

One Democrat close to the negotiations said, however, that the outline sounded more like a Republican wish list than a tentative agreement. Indeed, the GOP proposal to limit deductions ran into predictable flak from lawmakers representing states with heavy local taxes, such as California and New York -- states with large congressional delegations.

Budget negotiators can ill afford to alienate such large blocs of lawmakers, largely because any budget agreement is likely to be adopted by the slimmest of margins. Consequently, negotiators have begun to spend as much time counting votes as they have bargaining over what the proposals ought to be.

"Ideology is out," said one Democratic staffer. "It's all a question of how do you get to 218" -- the barest majority in the 435-member House.

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