White House and congressional budget negotiators buoyantly predicted yesterday that an agreement on a five-year, $500 billion deficit-reduction package can be reached in the next few days.
In an exchange of proposals that began late Monday night and continued yesterday, the Democratic and Republican bargainers began moving toward each other and away from the positions they had maintained virtually unchanged since the beginning of the budget process in January, participants in the talks said.
The negotiators are to return to the converted main bar in the Andrews Air Force Base Officers' Club this morning for a sixth day of bargaining. House Majority Leader Richard A. Gephardt (D-Mo.), who is presiding over the talks, vowed that, except for a brief gap this afternoon so lawmakers may go to the Capitol to cast votes, the negotiators will not leave the base without an agreement.
"We'll work all day and, if necessary, through the night," said Sen. Wyche Fowler Jr. (Ga.), a Democratic negotiator. "We're going to try hard to finish as soon as we can."
"I'm on the positive side of the mood swing," said White House Chief of Staff John H. Sununu.
Participants predicted that a deal on a package of spending cuts and tax increases that would save $50 billion in the first year could be reached as early as Thursday.
In the past days, administration officials have begun discussing a larger military spending cut than they had previously proposed and Democratic negotiators have nearly doubled the cuts they said they would be willing to accept in such benefit programs as Medicare.
In addition, the most recent Democratic proposal, offered yesterday, dropped their plan to raise the marginal tax rate for the wealthiest Americans, an element they said was important to restore fairness to the tax system. The concession was made to accommodate the administration's demand that income tax rates not be raised, Democratic participants said.
The Democratic offer still includes taxes on such luxury items as jewelry, boats and expensive automobiles and a temporary surtax on those with incomes higher than $500,000 a year, Democratic negotiators said. Revenue from the surtax would go to reducing the deficit.
Bargainers are considering a military spending cut of between $10 billion and $12 billion in the first year and between $170 billion and $200 billion over five years, participants said. The range of domestic spending saving is between $13 billion and $15 billion in the first year, and between $90 billion and $130 billion over the five years of the package, they said.
Even with an agreement on the dimensions of various parts of a plan, large differences remain on the details. On taxes, for instance, the Bush administration has stood firm in its support for a cut in the capital gains tax rate, which Democrats oppose as a break for the rich.
Among the components bargainers are considering is a proposal to link Medicare premiums to beneficiaries' incomes, participants said. Although the plan was devised by Sen. Phil Gramm (R-Tex.), it has been incorporated by the Democrats into their proposals.
The various versions of the plan would increase Medicare premiums for the voluntary coverage of physician and hospital outpatient services nearly fourfold for upper-income participants. Currently, participants in this voluntary coverage program pay 25 percent of the estimated cost -- a monthly premium of $28.60 this year. Under one version of the plan, the premiums would steadily increase for individual beneficiaries earning more than $25,000 a year and couples earning more than $32,000 annually. The plans would save as much as $6 billion in the first year and $30 billion over five years.
Curbing Medicare premiums would address one of the fastest-growing components in the federal budget. But it also would hit hardest the well-to-do elderly -- the same group that mobilized to force lawmakers last year to repeal the expansion of Medicare to cover catastrophic illnesses.