Budget Negotiators Push `Apex' Summit to the Wire

ALL of the traditional budget writers and dealmakers in Congress have fallen away now. This week, only the five top congressmen and a couple of White House officials are left at the budget bargaining table. Running out of terms, Capitol Hill staffers call this the ``apex summit.'' Come Monday, Oct. 1, the bulldozer of automatic budget cuts plows into the debt-ridden house of the federal government.

House Democrats pressed to stave off the impending crunch by wrapping funds for the military operations in the Gulf with a ``continuing resolution'' that would delay the budget sequester until Oct. 20.

President Bush promised, in sharp tones, to veto the move without a meaningful budget deal first.

The level of urgency and seriousness over putting together a deficit-cutting budget has been noticeably higher since politicians returned from August recess. The meetings run past midnight, tempers are sharp, and the barter is down to basic principles.

``I think they've scared themselves by how far they've gone without a deal,'' says one close observer, a business lobbyist.

The budget deal, with its five years of escalating deficit cuts, has been the most prominent domestic policy objective of the Bush White House.

Other initiatives, with the arguable exception of the war on drugs, have been held closely in check by concern for the budget deficit.

Federal Reserve chairman Alan Greenspan has added another inducement to a deal. With the economy doodling in the margins of recession, the Fed will move to ease interest rates if a deficit deal is struck.

The financial markets show an updraft of confidence on every rumor that serious deficit-cutting may be imminent. American business would like less competition from the United States Treasury for borrowing money. Less competition should mean lower interest rates.

The budget deal itself is only the first step. Democrats and Republicans alike have said for months that the more difficult test will be winning support for it in Congress.

The most difficult test will be winning over conservative House Republicans led by Rep. Newt Gingrich of Georgia.

Many of these Republicans, much like Housing and Urban Development Secretary Jack Kemp, are more concerned with economic growth than with federal deficits.

As a bipartisan consensus formed around the need for higher taxes to close the deficit, Mr. Gingrich and colleagues were calling for tax cuts.

The House GOP, in the minority now since the Eisenhower years, holds some general resentment about being dealt out of most political business. Specifically, some congressmen resent a Republican president who protects himself at the expense of House Republicans.

This was the complaint in the budget summit. When Bush reneged on his no-tax pledge, he may have been serving his own longterm goals, but he was also robbing Republicans running for Congress of their best issue against Democrats.

In a sense, House Republicans succeed by seeing the budget deal fail. ``Failure is success for them since they want less government,'' says James Thurber, director of American University's Center for Congressional and Presidential Studies.

The general strategy in the Republican Party for the past couple of years has been to run against Congress as a corrupted, Democratic-controlled institution. A budget failure helps make that argument and allows conservatives to hew to their principles without painful compromises.

The Senate Republicans have been more moderate. The business lobbyist, who does not want to be quoted by name, speculates that since Republicans controlled the Senate as recently as 1986, they have developed a tamer, more pragmatic, responsible-government approach.

Senate leaders from both parties tried to promote compromises that reconcile the most basic issues left in contention.

Republicans, led by the White House, want to cut the tax rate for capital gains income to promote economic growth. Democrats don't want to skew tax changes in favor of the affluent, who would primarily benefit from a lower capital gains tax.

Senate Majority leader George Mitchell (D) of Maine has been willing to cut the capital gains rate in exchange for a tax increase that would target the very wealthy. One option: a surtax on incomes over $500,000. Another: to raise the tax rate applied to additional earnings over about $187,000 from 28 percent to a rate between 31 and 36 percent.

Senate Minority leader Bob Dole (R) of Kansas floated another idea last weekend - treat the quest for capital gains under a separate bill from the budget package. Republican negotiators spared little enthusiasm for this idea, since it removed one of their favorite elements from the package.