It's 'Week of Potential' For a Budget Accord

Proposals would affect finances of most US families

The next few days will tell whether drafting this year's federal budget will be relatively quick and easy or long and tedious.

You may think you don't care.

But the tussle between the White House and congressional Republicans over how to balance the budget by 2002 will affect the finances of almost every American family.

At stake in the current budget negotiations are Republican proposals for a $500-per-child tax credit; a cut in the capital-gains tax, which would affect homeowners and investors who sell at a profit; and changes in the estate tax, which would make it easier for families to hold on to farms and small businesses. Also on the table are presidential proposals for per-child tax credits, credits and deductions for college tuition, and tax-deductible savings accounts to pay for certain educational, home-buying, or medical expenses.

The future of Medicare is also in play: The program is teetering on the verge of bankruptcy, and the trust fund will expire in about two years if nothing is done. Both sides are looking for a short-term fix; neither wants to bear alone the political heat that a long-term reform of the program will bring.

"It is a week of great potential," says Sen. Pete Domenici (R) of New Mexico, Senate Budget Committee chairman.

Each day for the last week and a half, a small group of negotiators has met in Senator Domenici's basement "hideaway" office - a special office given to powerful Senate leaders and committee chairmen to enable them to be closer to the Senate floor and work without interruptions. The scene is surreal: While the talks go on inside the office, a mob of reporters and Capitol police, whose headquarters is across the corridor, mills around outside. Instead of the magnificent ambiance of tiled Capitol floors and frescoed walls, this little-known hallway features a cement floor, brick walls painted yellow and gray, and a ceiling hidden by plumbing, electrical conduits, and ventilation ducts.

Joining Domenici are his committee's ranking Democrat, Sen. Frank Lautenberg of New Jersey; Rep. John Kasich (R) of Ohio, House Budget Committee chairman; Rep. John Spratt Jr. (D) of South Carolina; and presidential advisers Franklin Raines and Gene Sperling. Other congressional and administration figures come and go depending on the subject under discussion at the time.

Despite expressions of goodwill on all sides, it's not clear how much progress the negotiations are making. The president has adjusted his Medicare proposal by $18 billion to bring it up to the $100 billion cut in projected growth that he promised. And negotiators announced they had agreed on as much as $57 billion in savings from a series of small programs. But much tough bargaining remains.

"I don't think an objective observer would say anything is going on," says Robert Reischauer, former head of the Congressional Budget Office and now with the Brookings Institution, a centrist Washington think tank. "It's a long shot any agreement will be reached."

The GOP, still dazed from the aftermath of the 1995-96 government shutdowns, is taking a different tack this year. Republicans are trying to work off the president's budget, at his request, and to get agreement with the White House at the beginning, rather than at the end of the process. The lack of progress so far, however, led them to miss the April 15 statutory budget deadline. Congressional Democrats have hammered the GOP mercilessly for the delay, although their record while in power was no better.

"The same group that shut down the government last year is shutting down the budget process this year," insists Senate minority leader Tom Daschle of South Dakota.

House majority leader Dick Armey, however, is optimistic about prospects for a deal. "I still expect that we will have a budget resolution on the floor in the first two weeks of May, and I still believe that it is possible we can come to the floor with one that enjoys pretty broad-based agreement between Congress and the White House," he says.

GOP leaders say if they cannot cut a deal with the president soon, they will strike out on their own, seeking like-minded Democrats to construct a bipartisan plan to balance the budget by 2002 - the outcome that all players, including the president, say they want.

Mr. Reischauer believes the president, limited by demands from his liberal wing, can't be flexible enough to cut a deal now. He says it's more likely Congress will craft its own plan, which Republicans will hand to the president in the fall. "If the Republicans do this in the traditional way, the president is not going to have a lot of wiggle room come September," Reischauer says. "He's between a rock and a hard place."