The Bush administration's united front against raising tax rates on the wealthy began to show cracks yesterday, reflecting a widening debate within the administration over negotiating strategy on the budget and growing fears among some Republicans that the party is identified too closely with the
Appearing on television talk shows, administration officials appeared to differ over whether they would accept a budget agreement that includes higher rates for wealthy taxpayers in exchange for a cut in the capital gains tax long favored by President Bush.
But Bush's top advisers agreed they were willing to accept smaller cuts in Medicare spending as part of a new package.
White House Chief of Staff John H. Sununu, the administration hard-liner on the question, showed no public sign of budging on the tax question. "We think we ought to draw the line on the tax rates and not raise rates," he said on CNN's "Newsmaker Sunday."
But Vice President Quayle, reflecting the mood of congressional conservatives, indicated renewed willingness to consider such a trade, saying the administration was "willing to explore all options" in an effort to get a cut in capital gains taxes.
In a clear change of tone, Quayle described only as "an anomaly" the fact that the wealthiest taxpayers are taxed at a lower rate on each additional dollar they earn than are some taxpayers who make less. On ABC's "This Week With David Brinkley" he suggested that correcting that difference, known as "the bubble," was not the same as raising tax rates themselves.
For six months, the administration's budget strategy has been tightly controlled by Sununu, Office of Management and Budget Director Richard G. Darman and Treasury Secretary Nicholas F. Brady. But in the wake of the House vote early Friday morning rejecting the bipartisan deficit-reduction agreement, more administration voices have joined the debate.
That started Friday afternoon at a Cabinet meeting called by President Bush, where such former House members as Defense Secretary Richard B. Cheney, Deputy Energy Secretary W. Henson Moore, Veterans Affairs Secretary Edward J. Derwinski and Interior Secretary Manuel Lujan Jr. questioned an administration strategy that resulted in more than half of House Republicans voting against the president and the package -- and that left the party angrily divided and blaming the White House as much as the Democrats.
Several Cabinet officials argued that Sununu and Darman were so intent on punishing House Minority Whip Newt Gingrich (R-Ga.), who led opposition to the package, that they were preventing steps to patch up the party.
During the meeting, Sununu and Quayle differed on whether Bush should veto, or simply not sign, the bill Congress approved Friday night to fund the federal government for another week.
Sununu argued against a veto, fearing the White House could not prevent Congress from overriding it, while Quayle argued in favor of a veto as part of a strategy to reunite House Republicans. Ultimately Quayle's view prevailed and Bush's veto was sustained.
Some administration officials now believe it would be worth raising the top tax rate on the wealthiest taxpayers from 28 percent to 32 percent, if the Democrats agree to an acceptable capital gains tax. As Quayle put it, "If you're talking about collapsing the bubble, everyone making under $150,000 will actually be paying less taxes."
Congressional Democrats believe Darman is far more willing to make that trade than Sununu, who is more skeptical about the impact of the capital gains tax cut on the economy and who strongly supported the group of so-called growth incentive tax breaks included in the defeated package.
Darman hedged on the rates issue yesterday, saying on CBS's "Face the Nation" only that the trade for capital gains would not be "part of any agreement between now and Tuesday morning."
Darman and Quayle are thought to believe that over time the Republicans will have difficulty defending the "bubble," given growing concerns about tax fairness and new polls showing growing numbers of Americans who identify the party with the rich.