Administration, Congress near deal on discretionary spending levels

Budget negotiators for congressional leaders and the Bush administration finished work Tuesday night without a final deal on discretionary spending. But they generally agreed to a total fiscal 2002 spending level of $666 billion to $667 billion, or about 5 percent more than current-year spending.

Negotiators signed off on an 11-year tax cut of $1.35 trillion--a figure that some pivotal Senate Democrats have decided to back--and a Medicare prescription-drug reserve fund of $300 billion over 10 years, according to Senate Budget Committee Chairman Pete Domenici, R-N.M. After a day of nearly nonstop meetings among Republican leaders, budget conferees and top administration officials, Domenici left the final bargaining session of the evening to tell reporters, "We're getting close, but we're not there yet."

He added that the problem remained the final spending number, which he would not confirm. Domenici said talks would resume this morning with an eye to wrapping up Wednesday--"hopefully early, not late." Domenici said the final FY02 budget resolution would contain reconciliation instructions for an 11-year tax cut of $1.35 trillion, which he said is large enough for Congress to enact "all the priority items" President Bush has called for--marginal rate cuts, relief from the so-called marriage tax and estate tax, increasing the per-child tax credit--while providing a tax-cut "stimulus" in the current fiscal year.

That is the agreement an ebullient Bush embraced in an impromptu White House chat Tuesday. After saying for months that a 10-year, $1.6 trillion tax cut was "just right," Bush hailed the compromise, calling Tuesday a "great day for the American people and the American taxpayer."

In his remarks Bush steered clear of partisan rhetoric, emphasizing the cooperation that had brought about the deal.

"Today's agreement has a larger message as well: By finding common ground on an issue that divided the parties throughout last year's campaign, Republicans and Democrats have today proven we can work together to do what is right for the American people," Bush said.

"Achieving agreement on significant tax relief can help pave the way for a consensus on other vital issues, including reforming our public schools, strengthening Social Security and Medicare and transforming our national defense," he said.

White House Press Secretary Ari Fleischer portrayed the White House as pleased with the deal, even though it was short of Bush's goal.

Bush said he was seeking to keep discretionary spending in the budget resolution at a "reasonable level" and added that he would be "diligent over the next year to keep the spenders in check."

The spending level in general and how to enforce it during the appropriations process and in designating emergency spending remained sticking points for GOP conservatives in both chambers.

Sen. Phil Gramm, R-Texas, a budget conferee, said that while the tax-cut level was better than the $1.2 trillion the Senate passed last month, he remains concerned about spending.

"My primary concern right now is spending," Gramm said. "I could vote against it [the tax cut] if it's combined with explosive growth in spending."

In the House, where conservatives have adamantly insisted that the spending increase be kept to 4 percent, Majority Leader Dick Armey, R-Texas, said he could live with a $1.35 trillion tax cut. But Armey said the conference committee would have to keep spending down to win the support of House Republicans.

"We want them to understand they're together," Armey said of tax relief and spending reduction. "It's all one budget."

Senate Majority Leader Trent Lott, R-Miss., also acknowledged Tuesday evening that support for the budget will depend partly on the increase in discretionary spending.

"You've got to look at how many dollars, and what are those dollars for," he said.

Lott said he assumes that Sens. Lincoln Chafee, R-R.I., and James Jeffords, R-Vt.--who held out against past GOP plans--would vote for the compromise package.

Earlier Tuesday, Appropriations Committee Chairman Ted Stevens, R-Alaska, who has been pushing for higher spending numbers for defense in particular, said the spending plan was insufficient.

"I don't think they're near the numbers we need yet," Stevens said.

The FY02 spending total, according to GOP sources, will not increase the amount Bush requested for defense, despite a strong vote in the Senate to add another $8.5 billion to the FY02 defense number.

Among moderate Democrats who voted for the Senate-passed budget, Sen. Mary Landrieu of Louisiana said she was "still not comfortable" that a $1.35 trillion tax cut would leave enough room for spending on education, defense and Medicare.

And Democratic Sen. Thomas Carper of Delaware said $1.35 trillion is too high for him.

"I'm not interested in going higher," Carper said. "For me, $1.18 trillion is a ceiling, not a floor."

However, Senate Finance ranking member Max Baucus, D-Mont., whom the White House targeted as a potential supporter of the larger, $1.6 trillion cut, said he could back the $1.35 trillion figure.

Over 11 years, he said, "it's close to what Democrats supported" in the Senate version of the budget resolution.

And Sen. Ben Nelson, D-Neb., whom the White House has lobbied on its tax cut, remained noncommittal.

"We have inched our way to a very small gap between what they have been seeking and what the centrist group has been seeking," Nelson said. Centrists have backed a 10-year tax cut of $1.25 billion proposed by Sen. John Breaux, D-La.

Sen. Joseph Lieberman, D-Conn., called the Republicans' $1.35 trillion proposal "a compromise among themselves." The tax cut figure, he said, "is still so high, what you're going to do is to take the federal government back into a deficit."

Among members of the Blue Dog Coalition of conservative Democrats, Rep. Allen Boyd of Florida said Tuesday that his group had not reached consensus on a tax cut number.

"I think that some of our group senses now that the President is beginning to work with us and that pleases them," said Boyd, a Blue Dog co-chairman. "But there are some in the group that feel the number should be lower and should be for debt reduction."

Rep. Gene Taylor, D-Miss., a Blue Dog member, falls in the latter category, noting the unpredictability of budget surplus projections and unspecified defense spending.

"For me personally, no," Taylor said of a $1.35 trillion tax cut. "There is no surplus."

House Minority Leader Dick Gephardt, D-Mo., described conservative Democrats as a "constructive force."

"They're hoping they can modify this budget," Gephardt said, but added he could not predict how many House Democrats would ultimately vote for the budget resolution.

Keith Koffler, Charlie Mitchell, Geoff Earle and Mark Wegner contributed to this article.