Democrats reject leaders' budget offer House negotiators return to meetings as deadline nears

October 24, 1990|By Peter Osterlund | Peter Osterlund,Washington Bureau of The Sun Stephen Nordlinger and Karen Hosler of The Sun's Washington Bureau contributed to this article.

WASHINGTON -- The long-running budget saga lurched through another crisis yesterday, when rank-and-file Democrats rebelled against a deficit-reduction plan outlined by House Democratic leaders in a closed-door caucus.

House and Senate negotiators, however, scrambled in an effort to assemble a budget deal that could win congressional endorsement before midnight tonight, when the government is scheduled to run out of money and suspend nearly all of its operations if agreement has not been reached.

The deficit proposal, as presented to lawmakers in broad terms, would raise a variety of taxes, cut such benefit programs as Medicare and, supposedly, trim the federal deficit by $500 billion over five years. But Democrats objected vehemently to a provision that would limit deductions for those earning more than $100,000 and held out instead for a surtax on those with annual taxable incomes exceeding $1 million.

"We asked for a show of hands on support for the package and it was right down the middle, 50-50," said Representative Dan Rostenkowski, D-Ill., chairman of the tax-writing Ways and Means Committee, after a caucus of House Democrats. "That's not good, not good at all."

The plan received a strikingly different reception from Senate Democrats, who applauded Majority Leader George J. Mitchell of Maine when he later unveiled the same outline at a private meeting.

In a last-ditch effort to avoid collapse of the ongoing budget negotiations, Senate Minority Leader Bob Dole, R-Kan., and House Minority Leader Bob Michel, R-Ill., met with President Bush in the White House family quarters late last night and suggested that he endorse a surtax on the income of individuals earning more than $300,000 a year.

The Republican leaders argued that presidential support of such a measure, effectively surrendering to one of the Democrats' most steadfast demands for a sharp increase in the income tax levied on the wealthiest Americans, would eliminate some of the sorest points of contention in the deficit talks and enable most House Democrats to support the complete budget package.

[Afterward, a spokesman for Mr. Michel described the meeting with the president as inconclusive, the Associated Press reported.]

A sizable, even overwhelming, majority of House Democrats must support the deficit-reduction bill if it is to pass Congress, because nearly all members of the House's Republican minority have said they will vote against almost any package that raises taxes.

Congressional and White House negotiators, attempting to meld two very different versions of a deficit-reduction bill passed last week by each body, had proposed to raise the federal gasoline tax by as much as 6 cents. Even more hotly contested were proposals to cut Medicare by as much as $45 billion over five years and to eliminate as much as 5 percent of the value of income tax deductions written off by those with annual incomes exceeding $100,000 and as much as 8 percent of those with incomes over $1 million.

A surtax on incomes of more than $300,000, coupled with a reduced limit on deductions -- perhaps at 3 percent, instead of 5 percent, of the value of the write-offs -- and a top income tax rate of 31 percent could, congressional sources said, be the key to a long-awaited agreement between the parties and the branches on the budget.

The sources also said that House Democratic leaders were ready to back that plan even if President Bush refused to do so and to bring the resulting new deficit-reduction package to the floor for a vote today.

Even this surtax concession, however, would not eliminate the festering dispute over Medicare funding, potentially the last treacherous issue standing in the way of a compromise.

Many Democrats said they would oppose any deficit deal that would trim Medicare by much more than the $43 billion figure approved last week in the Democratic-authored deficit bill endorsed by the House. Others said they would oppose any deficit-reduction package that would eliminate more than 3 percent of a taxpayer's deductions.

Still other Democrats opposed any increase in the gasoline tax, which, like the limit of deductions, was part of the Senate bill but was excluded from the House's legislation. Many continued to insist that the ultimate deal include a surtax on those whose taxable incomes exceed $1 million a year -- a position advanced in the House's bill, not in the Senate's.

Speaking at a political fund-raiser in Manchester, N.H., President Bush commented, "Right now it's turmoil down there."

Mr. Bush appealed to Republicans to brush aside "self-interest" and support the emerging deficit plan. But there appeared little chance that Republicans in the House, largely sidelined from the negotiations, would heed the call.

Instead, House Republican leaders met privately in an effort to determine their next step.

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