BUSH DROPS TAX CUT DEMAND, US BUDGET AGREEMENT NEAR

Budget negotiators moved to within an eyelash of agreement early Sunday morning on a $500 billion deficit-reduction package, after President Bush dropped his demand for a cut in the capital-gains rate, congressional sources said. The agreement would avoid draconian cuts in government services that had been set to take effect Monday.

Senate Republican leader Robert Dole of Kansas said early Sunday that negotiators would contact President Bush in New York by 10:30 a.m., EDT. The president would then helicopter to the White House, where he was expected to meet negotiators shortly after 12:30 p.m.

``I assume by then we'll have an agreement,'' Senator Dole said as he left the talks shortly before 3 a.m. to get a few hours sleep.