Budget Feud Reveals Chasm Dividing GOP

House moderates resist conservatives' efforts to slice domestic programs to pay for a $101 billion tax cut.

House Republicans' struggle to agree on a budget - a herculean battle waged primarily over the size of a proposed tax cut - is pointing up a deep divide between GOP moderates and conservatives.

Months of wrangling could come to a head as early as today, if GOP leaders opt to bring a budget bill to the House floor. But party nose-counters are still scrambling for votes to pass it. Observers say Congress could fail to pass a budget resolution for the first time since 1974.

For Budget Committee chairman John Kasich (R) of Ohio, the issue is whether Republicans can agree on a spending cut to finance a tax reduction of $101 billion over five years. But moderates say that amount, on top of trims already laid out in last year's bipartisan budget agreement, would harm domestic programs.

Conservatives have pushed hard for a big tax cut: While hard-liners would like to cut as deep as $200 billion, most have lined up behind the Kasich proposal. But if Representative Kasich gives in to moderate demands for a figure smaller than $101 billion, he could lose as many conservative supporters as he gains in moderates.

With a 10-seat majority, Republicans have little room to maneuver. "It is a delicate balancing act," concedes Bruce Cuthbertson, Kasich's spokesman.

Even if the House GOP agrees on a bill, it's likely to hit a brick wall in the Senate, where GOP moderates and Democrats have more influence. Sen. Pete Domenici (R) of New Mexico, Kasich's Senate counterpart, has said he wants no part of the House plan. The Senate passed its budget resolution, which includes a modest $30 billion, five-year tax cut, in early April.

Earmarked for 'marriage penalty'

House Republican leaders want to use the $101 billion to end the "marriage penalty," a quirk in the income-tax laws under which some couples pay more because they are married than they would if they were single. The penalty primarily hits dual-earner couples who have roughly equivalent incomes. Other couples, such as those with one working spouse, actually pay less tax than they would if single. The challenge comes in lowering taxes of one group without raising taxes of the other.

Moderates aren't the only ones unhappy with the proposal. While the marriage-penalty is a priority of the religious right, the GOP's business constituents prefer cuts in capital-gains and inheritance taxes.

The dispute also highlights differences between those who believe there is little to be gained by a toe-to-toe confrontation with President Clinton, who has outmaneuvered the Republican Congress in the past, and those like Kasich who believe tax cuts will energize restless Republican voters in a congressional-election year.

To be determined ...

The original Kasich proposal contained specific cuts - such as eliminating the Commerce and Energy Departments. But the tireless budget chairman has now retreated to more-general language to overcome colleagues' objections. Some critics charge this is a return to the "magic asterisk" of the Reagan years: "cuts to be determined later" that never happen.

"Holding spending to $9 trillion over the next five years, cutting it one penny on the dollar from what it would have been ... is ... doable," Mr. Cuthbertson says. "People should be enthusiastic about being able to take the savings and do away with the marriage penalty...."

But opponents say the cuts would not be evenly spread. The Kasich plan puts Social Security and defense spending off limits, concentrating cuts in other areas. According to the Senate Budget Committee staff, the House bill would cut projected spending in health programs (including Medicare) an additional $14.3 billion, international affairs $11.3 billion, justice $8.3 billion, environmental programs $7.7 billion, and education $6 billion.

Moreover, the House bill would cut transportation spending $17.4 billion, while the new highway and transit bill would increase it by $17.5 billion over last year's balanced-budget agreement.

It's not clear how House Democrats will counter the Kasich proposal. Some may seek to build consensus around the Senate bill. The Concord Coalition, a bipartisan balanced-budget group, is pushing conservative Democrats and moderate Republicans to draft a compromise bill.

In practical terms, lack of a budget resolution means little in years when there's no deficit to reduce, says Stan Collender of Burson-Marsteller's budget-consulting group here. Appropriators will move ahead on the 13 annual government-spending bills based on last year's agreement, but they'll have to move fast to finish before the Oct. 9 adjournment date.

More important is the political impact. Failure to pass a House-Senate resolution makes any tax cut next to impossible. "The failure of the Republicans to make the railroads run on time when they're in the majority" could hand Democrats an issue for the fall campaign, says Mr. Collender. Still, Kasich "has accomplished what he needed to politically by emphasizing tax cuts."

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