Conferees Gain Ground in Race for Budget Plan

WASHINGTON —  Racing against a midnight Wednesday deadline for shutting down the government again, a House-Senate conference committee reportedly made considerable progress on a compromise budget plan Monday, despite a weekend falling-out on how the rich should be taxed.

But an agreement remained elusive as congressional aides ran into delays in completing computer analyses of the new proposals, which were designed to resolve differences over additional tax burdens for millionaires and the size of cutbacks in the Medicare program.

Even so, Republicans and Democrats apparently narrowed their differences over how much to raise gasoline taxes in a new deficit-reduction package--with a 6-cent-a-gallon increase emerging as the most likely compromise between outside limits of 5 and 7 cents.

They reportedly were only $2 billion apart on the size of Medicare reductions and close to agreement on how to soften the impact on elderly beneficiaries, who are regarded as a potent political force.

They also decided on raising about $6 billion in extra taxes from the very wealthiest Americans, but they clashed again on just how to do it.

Leaders in both chambers began cautiously checking rank-and-file sentiment for reaction to a possible agreement that would split the difference between differing Senate and House bills and presumably would receive the support of President Bush.

With Election Day only two weeks away, many lawmakers are skittish about approving large tax increases for gasoline, as well as the higher taxes on beer, wine, alcohol and cigarettes, that would have the greatest impact on middle-income and lower-income families.

But the prospect that the lawmakers might not come up with a budget plan in the waning days of the 101st Congress also alarmed those who wanted to “do something” about the deficit before going home to face the voters.

“We don’t have an agreement,” Senate Minority Leader Bob Dole (R-Kan.) told the Senate early Monday evening. “Are we close? I’m not certain. I thought we were close yesterday afternoon but that fell apart.”

Earlier, Dole declared confidently that a budget deal was “in sight,” and Democratic negotiators said that they also believed it would be possible to resolve the five-month-old controversy before Wednesday night, when federal spending authority will expire.

The conference committee negotiations hit a snag Sunday when Democrats refused to go along with a Republican offer to raise revenue on taxable income above $1 million by disallowing 8% of taxpayers’ deductions.

The Democratic bargaining team preferred its own approach--which would have imposed a 7.5% surtax on millionaires--on grounds that it would have a uniform impact nationally and would be far easier to explain than a complex limit on upper-income deductions.

Since it is considered likely that Democrats will have to provide most of the votes in the House for any budget package, House Majority Leader Richard A. Gephardt (D-Mo.) said, the final package should have the party’s stamp on it to increase the odds of success.

That enraged White House Chief of Staff John H. Sununu, who was representing Bush. Accusing the Democrats of blocking progress, Sununu angrily declared the talks at an impasse and left to report to the President.

Congressional negotiators, however, resumed the negotiations Sunday night. Monday morning Richard G. Darman, director of the White House Office of Management and Budget, came to Capitol Hill to represent the Administration.

Despite Democratic allegations that the President was trying to protect the rich during the budget talks, the latest package includes an Administration-backed plan to raise taxes on people with incomes above $100,000 as well as those with taxable earnings of $1 million or more.

But Republican negotiators joined top White House officials in standing behind a plan first advocated by a Democratic member of Congress--Rep. Don J. Pease of Ohio--that would raise taxes on the rich by taking away a fraction of their usual deductions for mortgage interest, charitable contributions and state-local taxes.

The “deduction reduction,” as Dole described it, would take away 4% of all deductions for those above $100,000 up to $999,000. Above that level, the “super-Pease plan” would deprive millionaires of 8% of their deductions. Medical expenses, casualty losses and interest on investment loans would be exempt, however.

“The White House seems to have drawn a line in the dirt against the surtax,” said an aide to a Democratic negotiator.

Dole said he hoped that Congress could finish the budget and all of its other business by Wednesday midnight and adjourn for the year. If it does not, the minority leader said, it may be difficult to pass another stopgap resolution to keep the government operating beyond the current deadline.