White House, Congressional GOP Reach Budget Deal

White House officials and congressional Republican leaders struck a budget deal Wednesday that would deliver on President Bush's goals of cutting taxes and limiting the growth of spending, though by less than he wanted.

The pact — brokered after weeks of bargaining — would cut taxes by $1.35 trillion over the next 11 years, less than the $1.6 trillion, 10-year tax cut Bush has made the focus of his economic plan. Even so, it would be one of the deepest tax cuts ever.

The agreement would also let spending for many programs grow next year by 5 percent — higher than the 4 percent Bush had long said was sufficient.

In both cases, Bush and GOP leaders had to bow to demands from moderate Republicans and Democrats for smaller tax cuts and more spending.

"The agreement is the largest tax cut in a generation and reasonable levels of spending," Bush told reporters as he met at the White House with GOP leaders and a handful of moderate congressional Democrats who are supporting him.

House and Senate leaders were planning to push a budget for 2002 reflecting the tax and spending agreement through Congress on Thursday.

In a nod to the Democratic moderates who signed onto the agreement, Bush said the pact "could not have been done without the cooperation and work of some of our Democratic friends."

Those Democrats were empowered because two moderate GOP senators — James Jeffords of Vermont and Lincoln Chafee of Rhode Island — refused to vote for Bush's higher tax-cut proposal. That was all that was needed in the Senate, which is divided 50-50 between the two parties.

Some of the moderates were with Bush and GOP leaders at the White House for the announcement of the pact. They included Sen. John Breaux, D-La., Sen. Zell Miller, D-Ga., and Rep. Gary Condit, D-Calif.

Bush had made a $1.6 trillion, 10-year tax cut the cornerstone of his economic plan since early in his campaign for the GOP presidential nomination in 1999.

But facing resistance from moderates of both parties in the evenly divided Senate, he took the best deal he could get: $1.25 trillion in tax cuts from 2002 through 2011, plus $100 billion more in 2001 and 2002 aimed at sparking the economy.

Republicans also agreed that spending next year for education, defense and many other annually approved programs would grow to $667 billion, 5 percent more than this year's $635 billion. Bush had proposed a 4 percent increase to $661 billion, arguing that spending boosts need to be restrained, but the figure grew under pressure from the Senate.

The increase would cover the one-third of the federal budget that encompasses everything the government does except automatically paid benefits such as Social Security.

"President Bush is not a king, he's a president," the Senate Budget Committee chairman, Sen. Pete Domenici, R-N.M., told The Associated Press, explaining why Bush did not get all he demanded on taxes and spending. "If this isn't a victory, what is?"

Senate Minority Leader Tom Daschle, D-S.D., called the GOP tax agreement "a step in the right direction" because it trimmed Bush's proposal. But Daschle said he would oppose the budget because the tax deal would still divert money from education and other priorities.

House Speaker Dennis Hastert, R-Ill., called the agreement "a tax relief victory by any measure," adding, "Within this year, hardworking Americans across this nation will be benefiting from more dollars in their pockets."

The budget sets overall fiscal goals that are implemented in later tax and spending bills. The House already has approved bills cutting the income, estate and other taxes Bush has proposed paring. Congressional approval of a budget would let Senate tax-writers begin voting on their own package next week.

Republicans said they would seek additional tax cuts that would go beyond the budget's tax numbers in separate, smaller bills.

The agreement would let Bush and congressional Republicans claim credit for one of the biggest tax cuts in decades. But it also underscored the limits on the president's power forced by the Senate's 50-50 division between the two parties. The new tax figure was only reached after several moderate senators said they would support it and White House aides concluded they could do no better.

The tax agreement was virtually identical to what the moderates had been insisting was the biggest package they would support. One of their leaders, Sen. John Breaux, D-La., endorsed the deal and predicted it would garner enough moderates' votes to win passage.

In the budget it approved in March and in tax bills it already has passed, the House endorsed Bush's full $1.6 trillion tax-cut. But in its budget, the Senate approved only a $1.2 trillion cut. In the end, Bush had to bow to the realities of the divided Senate, in which 14 moderate Democrats and two moderate Republicans refused to move above $1.25 trillion, plus an accompanying stimulus package.