Bucking Against the GOP's Fiscal Agenda

Growing divisions between moderate Republicans and hard-line conservatives threatened to derail the Republican economic agenda.

In the House, where Republicans have ruled with ruthless efficiency for more than a decade, leaders were forced to pull a major budget resolution aimed at cutting spending by $54 billion over the next five years when it became clear there were not enough votes to pass it. The embarrassing stumble not only reflected the disarray since the forced resignation of Majority Leader Tom DeLay but also the renewed determination of centrist Republicans to smooth the harsh edges of their party platform.

The moderate position got a boost from Tuesday's election results, in which Democrats won gubernatorial elections in Virginia and New Jersey, Republican Gov. Arnold Schwarzenegger was rebuffed by California voters on a number of ballot initiatives and a moderate Republican easily won reelection as mayor of heavily Democratic New York City. Fresh polls showed widespread voter dissatisfaction with both President Bush and the Republican Congress.

In the House, moderates balked at giving oil companies the right to drill for oil and gas in the Alaskan wilderness, an item that has topped the president's energy agenda. They were also uncomfortable with proposed spending cuts for popular programs that benefit the working poor, including Medicaid, foster care, child support enforcement and student loans. But when party leaders offered to strip out the Alaskan oil provisions, they suddenly faced an open revolt from some oil-state representatives.

At the Senate Finance Committee, meanwhile, Chairman Charles Grassley was having similar problems winning an extension of expiring tax cuts on capital gains and dividends -- the holy grail of the Republican economic policy. Maine Sen. Olympia Snowe declared she simply could not support a tax cut that primarily benefited the rich. But when Grassley tried to win approval of the tax package without the investment tax cuts, several of the panel's other Republicans refused to go along.

Senate Republicans are heading for their own confrontation over spending cuts. Rather than target Medicaid, senators would like to eliminate billions of dollars in guarantees for health insurers that were used to lure their participation in the new Medicare drug benefit. But the White House is threatening a veto if any changes are made to the drug plan, for which seniors can begin signing up this week.

The Senate is also deadlocked on a pension reform bill that could force companies to set aside more money each year for their future retirees and increase premiums for the government's pension guarantee agency. House committees have completed action on their version of the bill.