WASHINGTON — REPUBLICANS in Congress this week begin to confront their toughest test to date in determining how much they want to shrink the federal government to balance the budget.
Most GOP leaders in both the House and Senate now agree that the growth of Medicare spending will have to be slowed to meet their goal of eliminating the federal deficit in seven years.
But divisions loom within the party over how best to do it and whether the GOP can push ahead with tax cuts while trying to make all the budget arithmetic add up.
Through it all, Democrats are happy to play the role of scolding tutor -- pointing out that the GOP numbers won't work and letting the GOP, in particular, take on the politically prickly job of tampering with health-care provisions for America's elderly.
Many challenge the viability of balancing the budget by 2002 -- a process that will exact hard concessions from popular domestic programs and demand the reform of Medicare -- while reducing revenues through tax relief.
Many House Republicans are wedded to tax cuts. But in the Senate, Budget Committee chairman Pete Domenici (R) of New Mexico, a pivotal player in the debate, insists they will have to be deferred until Congress has proved it can balance the budget by 2002.
Yesterday, Senator Domenici unveiled his plan to slow the growth rate of Medicare spending to save some $250 billion. He wants to slash the program's cost, now advancing two or three times the growth rate of the total economy, from a projected annual increase of 10 percent over the next seven years to 7.1 percent. The move ''will generate the savings needed to put the system on a financially sound footing,'' the Budget Committee chairman says.
''Any program set up to go bankrupt is a fundamentally flawed program,'' says John Bolton, president of the National Policy Forum, a GOP think tank. ''It means a lot of people paying into it are not going to receive benefits.''
For those approaching retirement age, he says, ''that could soon become a reality.'' While there is growing public awareness about the problem, Mr. Bolton says, ''there is no consensus on solutions'' in the Republican Party.
Domenici expects his blueprint to pass the Senate by the end of May. And the coming weeks will tell how his bill jibes with the House version. Speaker Newt Gingrich (R) of Georgia says Medicare should no longer be the elderly's only means for health insurance. Instead, he offers a voucher system to afford people choices to buy other insurance. Individuals could keep the money they save by choosing less coverage or cheaper programs, and there would be incentives to be cost conscious.
Domenici and Rep. Gingrich face challenges in winning over their Republican colleagues. And they must deal with critics on the left who counter that the private insurance companies and Health Maintenance Organizations are biased toward relatively healthy beneficiaries, leaving people in the Medicare system who are ill and poor. Detractors warn that slowing spending will prevent the program from keeping pace with inflation and the growing numbers of people eligible for the entitlement.
''And you have President Clinton demagoguing the issue by accusing the Republicans of trying to take health care away from the elderly to line the pockets of the rich,'' says Brookings Institution economist Barry Bosworth. Still, Medicare must stay on the table, insists Mr. Bosworth, a former senior economic adviser in the Carter administration.
If costs aren't contained now, he cautions, there won't be a program to speak of. Moreover, if all the budget's big-ticket items are off limits -- including defense, Social Security, and Medicare -- then ''you have to raise taxes or cut more programs, and you can't keep doing that every year,'' Bosworth says.
Some GOP members contend that tax cuts will spur economic growth and add to revenues by freeing up capital for investment. But Brian Wesbury, chief economist of Congress's Joint Economic Committee (JEC), says any hope of finessing the budget issue by tweaking the tax structure should be dodged.
''Government spending has outstripped revenues for a long time,'' he says. ''No matter what we do to taxes, we can't bridge the gap. Obviously the answer lies on the spending side.''
Senate majority leader Bob Dole, Gingrich, and other GOP leaders who have already signed onto a tax cut, are in a ''mess,'' Bosworth says. ''Now they're going to have to make Domenici the man who kills the proposals for tax cuts for the rich.''
In the interim, congressional Republicans will continue to weigh in on the issue. JEC chairman Sen. Connie Mack (R) of Florida, whose constituency is made up in large part of retirees, has called for a commission to assess the impact of Medicare spending reductions.
House Budget Committee chairman John Kasich (R) of Ohio, who has pledged to balance the budget and cut taxes, will fuel the debate when he releases his seven-year fiscal plan today. He will set a ceiling for Medicare spending and outline options to meet that target.