House, Senate Strike Budget Deal

WASHINGTON – Congressional lawmakers struck a deal on Wednesday that delays resolving a House-Senate dispute over President Bush's proposed tax cuts.

They also tried to settle differences over Bush's Iraq war package giving the White House $80 billion to work with for now on funding the war and reconstruction effort.

The budget compromise — which won crucial support from a pair of moderate GOP senators — removed the last major obstacle to congressional passage this week of a $2.2 trillion tax-and-spending plan for 2004. Leaders also wanted to send the president the war spending bill this week.

The fiscal blueprint would let the Senate pass a tax-cutting bill in coming weeks costing $350 billion through 2013, while the House's price tag would be $626 billion, House Budget Committee Chairman Jim Nussle said. The two chambers would have to approve a bill with a common number before shipping it to Bush for his signature.

The agreement seemed to spell the end of the full $726 billion package Bush proposed in January as a major pillar of his domestic agenda. He said his plan — which would end taxes individuals pay on corporate dividends and accelerate scheduled income tax cuts — would revitalize the listless economy.

Similar House and Senate versions of a bill authorizing money for the war and post-Saddam Hussein reconstruction effort, approved last week, were dominated by roughly $62 billion for the Pentagon, as Bush requested.

The White House says the president needs that wiggle room to effectively deal with the unpredictable turns of war, but lawmakers refuse to cede the president the power of the purse.

The final version of the spending bill also will likely include $3 billion in aid for struggling airlines, perhaps including assistance for laid-off airline workers.

The White House didn't ask for this money and has called the House and Senate proposals "excessive."

One of the remaining obstacles to passage of the war package, which would be attached to the 2003 fiscal year budget, were objections by Senate Appropriations Committee Chairman Ted Stevens, R-Alaska, who opposes House demands to omit extra-spending items included in the Senate version, for instance extra cash for an animal lab in Iowa.

Bush argues that the tax package, which would eliminate individuals' taxes on corporate dividends and accelerate some income-tax cuts, will give the U.S. economy a badly needed shot in the arm.

The finance committees now have to hammer out the tax bills, which are separate from the budget bill, and the whole question of reconciling the two numbers would come up again when the tax bills are negotiated between House and Senate lawmakers.

By doing this, both chambers will be able to pass the non-binding budget resolution, which Senate Republicans desperately want to take place after coming down hard on Senate Minority Leader Tom Daschle, D-S.D., for not doing when he was Senate leader last year.

The maneuver, though, would "kick the can down the road" and allow a budget to be passed even though there is an impasse between the two chambers over the size of the tax cut.

Asked about the idea, Nussle, R-Iowa, said, "That's the current effort to get the Senate on board. The initial reaction has been positive."

Dispensing with diplomacy, he added that the new approach was needed because of "four votes in the Senate, who don't seem as concerned about economic growth as the vast majority of the Republican Party, and we need to manage that problem."

Republicans there have fallen two votes short of increasing the $350 billion tax cut because of various votes against that plan by GOP Sens. Lincoln Chafee of Rhode Island, John McCain of Arizona, Olympia Snowe of Maine and George Voinovich. Voinovich and Snowe said Wednesday they may endorse the new plan.

But Sen. Charles Grassley, R-Iowa, chairman of the Finance Committee, said he is not pleased with the decision.

"The motivation is pretty clear and simple: To pass the buck ... for something the budgeteers couldn't figure out," Grassley said.

Daschle called the plan "amazingly innovative" but also a "sham."

"There will be an uproar of some magnitude if somebody tries to do this," he said. Most of the Senate's 48 Democrats oppose tax cuts greater than $350 billion.

Congress' budget sets revenue and expenditure totals for the year, and does not need the president's signature.

On another domestic issue, the House voted 265-150 Tuesday for a non-binding measure calling for inclusion of workers' benefits.

There were 67 Republicans who voted for the resolution, despite a letter Tuesday from White House budget chief Mitch Daniels that said benefits for a specific industry would be "unusual, unfair and potentially harmful."

Fox News' Julie Asher and The Associated Press contributed to this report.