Congressional GOP leaders, betting President Bush will emerge from the war powerful enough to rescue most of his $726 billion tax cut proposal, were trying to strike an unusual budget agreement last night that would postpone negotiations over the tax cut's size until later this year.
House and Senate GOP leaders are hoping to avert a potentially embarrassing intraparty budget fight over the Bush plan by agreeing to disagree -- at least for several more weeks -- over how much of a tax cut the country can afford as deficits swell to historic heights.
Under the proposed deal, the House and Senate would pass a $2.2 trillion budget resolution by week's end calling for a $350 billion tax cut in the Senate and $626 billion in the House. Late last night, however, GOP leaders were warned that the Senate parliamentarian might not allow the unorthodox deal to go through as planned, two GOP aides said. A senior House GOP leadership aide said it could fall apart at an emergency meeting of top Republicans this morning.
A final decision is expected today. Never before has Congress passed a budget resolution with different tax numbers for the two chambers.
House and Senate members must settle on one number before they can send a tax cut bill to Bush for his signature. The easiest way for Republicans to achieve a big tax cut is to approve a budget resolution, which would set the parameters for spending and tax cuts for 2004. Under Congress's budget rules, Republicans would need 50 votes in the 100-member Senate for a tax cut if a budget resolution has been passed. Without a resolution, they would need 60 votes, a dubious proposition in the narrowly divided chamber.
Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) accused his GOP colleagues of simply "passing the buck" because budget writers couldn't "figure out" a compromise between conservatives who want large tax cuts to spur economic growth, and liberals and moderates who want smaller tax reductions to keep a lid on budget deficits.
Most Democrats oppose the GOP's unorthodox solution. "There will be an uproar of some magnitude if somebody tries to do this," said Senate Minority Leader Thomas A. Daschle (D-S.D.). The Republicans' strategy is twofold: They want to appear fiscally responsible by passing a budget resolution by the April 15 statutory deadline and providing Bush more time to woo four Senate Republican opponents of his tax cut plan. It now will take Congress weeks, if not months, to settle on a final tax number.
Republicans hope a military victory in Iraq will enhance Bush's clout with lawmakers and persuade Republican critics of his plan to fall back in line. Bush, preoccupied by the war, has spent little time lobbying members in recent weeks. Such one-on-one encounters worked well for him in past tax cut fights.
Following a successful military campaign in Iraq, Bush "becomes a very much stronger president today than he was a few months ago," said Sen. Pete V. Domenici (R-N.M.). Sen. John McCain (Ariz.), one of the four GOP senators blocking the larger tax cut, said he would be more inclined to support a tax cut -- in hopes of energizing the economy -- once the war is over and the cost of rebuilding Iraq becomes clear. "If they kick it off long enough, I could support a stimulus package," McCain said yesterday in an interview.
But a conservative victory is far from certain. Bush's other GOP opponents -- Sens. Lincoln D. Chafee (R.I.), Olympia J. Snowe (Maine) and George V. Voinovich (Ohio) -- maintain they will not support a tax cut bigger than $350 billion, regardless of how much time Republican leaders buy themselves. If these members hold firm, it will be virtually impossible for Congress to enact a tax cut exceeding $350 billion this year. That would mean Bush's plan to eliminate the dividends tax probably would be dropped in favor of income tax rate cuts and other tax incentives for families and business owners.
Because Republicans hold a two-seat majority in the Senate, they cannot win support for a tax cut bigger than $350 billion without either persuading GOP opponents to change their minds or picking up the support of a few Democrats. Sen. Zell Miller (Ga.) is the only Democrat backing a tax cut exceeding $350 billion.
Once the war is over, Bush is expected to focus more on the domestic front and begin new campaigns to revive the economy and provide prescription drug coverage to the elderly, White House officials said. While Republicans are gambling that Bush will emerge from the war victorious and more powerful, some lawmakers wonder how much more he can gain. Four of 51 Senate Republicans and about a dozen of the House's 229 Republicans now oppose him on tax cuts. Bush's challenge is to convince them that the country can afford big tax cuts and a big increase in military spending and big deficits without harming the economy.
Underscoring the problem of mounting deficits, Republicans plan to raise the federal debt limit for the second time since Bush signed into law his $1.35 trillion tax cut in 2001. The limit was raised to $6.4 trillion in June, but the Treasury Department wants to push it higher.