Once a final deal is cut on taxes, the Republican administration and the Democrats who run Congress will have to find a way to make peace if they're going to deal with the budget crisis.
That will be at least as difficult as the House-Senate negotiations this past week on the misnamed reconciliation bill that is supposed to bring the current budget into line with congressional goals. The tax measure is part of the budget reconciliation bill, a catchall of contentious issues on which final terms are to be worked out this week, in conferences working under the pressure of an Oct. 15 deadline.Mutual promises of bipartisan harmony have frayed in the struggle over Bush's campaign-promised drive for a cut in capital gains taxes. A two-year cut from the current maximum of 33 percent to 19.6 percent is on the conference table by House vote, a roll call on which 64 Democrats deserted their new floor leaders.
It got there after a dispute that bruised both sides. Richard G. Darman, the budget director, accused the Democrats of kamikaze politics aimed at forcing a tax increase on Bush. Rep. Richard A. Gephardt of Missouri, the majority leader, said Bush apparently agreed with Leona Helmsley that only little people should pay taxes. After the House victory, Bush said he was displeased with Gephardt for making the issue "really kind of personal."
The Democratic leadership first had considered tackling the Bush capital gains measure head-on, in an up-or-down test, but their own vote counts showed them taking a lopsided beating. So they countered with a retirement account tax break for the upper-middle class, plus a tax increase on the wealthiest taxpayers, and lost anyhow.
The $2,000 tax deduction for individual retirement accounts was revived in the Senate Finance Committee and the final package could include versions of both that tax break and the capital gains reduction. The Senate panel also tossed in an assortment of special interest tax breaks, and that is likely to complicate the congressional negotiations.
The reconciliation bill is an annual exercise that is supposed to reduce the budget deficit, which keeps going up anyhow, even as deficit estimates and targets keep going down because of the law that is supposed to compel real reductions even if that takes automatic spending cuts. "We have to stop this deficit . . . ," said Sen. Herbert H. Kohl, D-Wis, "we have to stop fooling ourselves with Gramm-Rudman claims of prog-ress which just hide deficits that have never declined."
That problem is going to remain after the bill is passed, whatever the settlement on taxes. House Speaker Thomas S. Foley thinks it may get worse because of the tax fight.
There are pressures on both sides to do more campaigning and less compromising. The Democrats' new leadership has been criticized for lack of a game plan with a clear set of goals as alternatives to the Bush program. Activist House Republicans, frustrated at what seems permanent minority status, see confrontation as a way to start winning more seats.
But Foley also thinks it essential that there be a "grand compromise" between the parties in order to deliver a real solution to the deficit. Speaking in Minneapolis before the capital gains vote, The speaker said the parties must be able to cooperate so that each can "provide the protection to the other party to make the hard choices necessary for meaningful deficit reduction."
To do it, he said, Democrats would have to protect Republicans willing to vote for cuts in costly entitlement programs in order to control spending. The biggest of the entitlements is Social Security. On the other side of the ledger, Foley said, Republicans would have to be willing to give Democrats political cover if they were to support higher taxes to reduce deficits.
That would not only be a grand compromise, it would be a political miracle.