Congress approves $2.2 trillion budget plan

Key senators rebuff tax cut offered in House

April 12, 2003|By Julie Hirschfeld Davis | Julie Hirschfeld Davis,SUN NATIONAL STAFF

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.

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