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GOP Debates Prospects for Tax Cut

The Budget
By Eric Pianin
Washington Post Staff Writer
Friday, July 2, 1999; Page A3

A huge surge in projected budget surpluses had Republicans' mouths watering yesterday on Capitol Hill, as they celebrated the prospects of a new round of tax-cutting with a Fourth of July-style rally--complete with a colorful fife and drum corps.

House Speaker J. Dennis Hastert (R-Ill.) pronounced the nation on the cusp of a new era of economic security and challenged President Clinton to join with Republicans in passing major tax cuts and reforms of Social Security and Medicare. "As we commit ourselves to finding ways to secure our retirement programs, we also commit ourselves to bringing fairness to the tax code," Hastert said.

But despite new forecasts of soaring surpluses, Republican leaders were finding that it may be as hard to balance competing GOP interests as nailing down a deal with the White House.

Moderates and conservatives disagreed over the size and scope of future tax cuts. Appropriators and budget leaders fought over whether to use some of the surplus windfall for increased domestic spending. And confusion reigned over precisely how to go about revamping Medicare so it offers a prescription drug benefit.

"There's more red meat on the table now, but that doesn't guarantee the dinner party will be polite," said Robert D. Reischauer, former director of the Congressional Budget Office. "We could have more snarling over the division of the red meat rather than an attempt to reach some accommodation and compromise."

As a foretaste of that snarling, House Budget Committee Chairman John R. Kasich (R-Ohio) yesterday chastized appropriators for "dragging their heels" in drafting major spending bills in the hope that the leadership and White House would eventually agree to use part of the surplus to beef up next year's spending. Kasich told reporters he is "absolutely" opposed to lifting the spending ceilings to accommodate more spending, and suggested that appropriators who think otherwise need a "reality check."

Rep. John Edward Porter (R-Ill.), whose subcommittee controls spending for labor, health and education programs, fired back that it is Kasich who needs to get real about the inadequacy of available funding that will make it impossible to pass key domestic spending bills this summer.

"The name of the game is governing, and that means at a minimum passing the appropriations bills," Porter said. "We're looking at the numbers . . . and we don't know where the votes will come to pass these bills."

While Kasich took a strong line against raising the spending caps, Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) took a different tack, saying he favors a comprehensive deal with the White House that would provide more money for domestic programs, safeguard Social Security and Medicare, and enact a healthy tax cut.

"I want to put together a package to accomplish all our goals," Domenici said.

Three days after the White House issued revised estimates showing a $1.08 trillion bonanza of non-Social Security surpluses over the coming decade, the Congressional Budget Office released yesterday an only slightly less rosy update showing $996 billion of surpluses. According to the CBO, the surplus will total $120 billion this year and $161 billion in fiscal 2000, including about $14 billion more than expected in surpluses outside the Social Security program. That $14 billion windfall is likely to be the subject of vigorous competition, as congressional appropriators and tax writers both attempt to claim it.

During yesterday's GOP rally, House Ways and Means Committee Chairman Bill Archer (R-Tex.) outlined a tax package that includes some form of broad-based tax relief--possibly a percentage point reduction in every taxpayer's total tax obligation, according to sources--an end to the "marriage penalty," and reductions in capital gains and estate taxes.

Republicans already are calling for a tax cut of $775 billion over 10 years. Earlier this week, Archer seized on the more optimistic administration figures to say the package could grow to $1 trillion, drawing sharp protests from GOP moderates. Yesterday, as the new CBO numbers became known, Archer pulled back, saying, "It's fair to say it [the tax bill] likely will be between $800 billion and $900 billion."

House Minority Leader Richard A. Gephardt (D-Mo.) said the GOP's new tax cut plan demonstrated that "there is not any chance" for a compromise. "How can you compromise when they get new numbers and they run out immediately with a fife and drum corps . . . saying they want to spend over $1 trillion on a tax cut for the wealthiest Americans?" Gephardt said.

Staff writer Juliet Eilperin contributed to this report.

© 1999 The Washington Post Company

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