WASHINGTON — Putting aside efforts to control the federal deficit before the elections, Republican and Democratic congressional leaders agreed in principle on Wednesday to extend $150 billion worth of tax cuts sought by President Bush without trying to pay for them.
In a House-Senate conference committee, Democratic lawmakers said they would not try to block a Republican bill that would extend three popular tax cuts for middle-class voters and several business tax breaks and reluctantly abandoned efforts to pay for the measures by imposing a tax surcharge on families that earn more than $1 million a year.
"I wish we could pay for them, but this is a political problem, and we have people up for re-election," said Rep. Charles B. Rangel of New York, the senior Democrat on the House Ways and Means Committee. "If you have to explain that you voted for these tax cuts because they benefit the middle class and against them because of the deficit, you've got a problem."
Fearful of being attacked as supporters of higher taxes, Democrats said they would go along with an unpaid five-year extension of the $1,000 child tax credit; tax breaks intended to reduce the so-called "marriage penalty" on two-income families; and a provision that allowed more people to qualify for the lowest tax rate of 10 percent.
Even as they pushed for the cuts that will add to the federal budget deficit, House Republican lawmakers said on Wednesday they hoped to have a vote soon on a constitutional amendment that would require the government to balance the budget by 2010, except if the country is at war.
That proposed amendment has no chance of becoming law, but it would conflict with even the Bush administration's rosiest goals for reducing the deficit. Bush has promised only to cut the deficit in half by 2009.
Approval of the tax reduction
package is a significant victory for Bush, who champions the extension of the tax cuts at every campaign stop but whose wishes had been thwarted by Democrats and a handful of Republican moderates in the Senate.
As recently as July, the moderates demanded that such tax cuts be paid for either with budget cuts or with higher taxes in other areas. By teaming up with Democrats, the Republican moderates prevented their own party leaders and the Bush administration from getting their way.
But with the elections looming, congressional Democrats said they would not let themselves be branded as supporters of tax increases, which would occur if the expiring provisions are not renewed.
Sen. John Kerry, their party's presidential nominee, has said he supports extension of the tax reductions, though he would roll back Bush's tax cuts for the top 2 percent of income earners — families with annual incomes above $200,000.
Sen. Tom Daschle of South Dakota, the Senate Democratic leader, announced earlier this week that he would support a five-year extension of the tax cuts even if they were not paid for.
With Democrats capitulating to the Republican majorities in both the House and Senate, the handful of Republican hold-outs have quietly surrendered as well.
The Republican rebels — Sens John McCain of Arizona; Lincoln Chafee of Rhode Island and Olympia Snowe and Susan Collins of Maine — infuriated Bush and many Republican leaders. But their ability to block action evaporated without the votes of Democrats.
The result of the reversal on the part of the Democrats and the Republican moderates is likely to be a tax measure that would last longer and increase federal deficits more than a two-year extension that Republican Senate leaders offered this summer. The federal deficit is expected to hit $420 billion this year, a record in dollar terms. The nonpartisan Congressional Budget Office has estimated that debt will climb by $2.3 trillion over the next 10 years and that making all Bush's tax cuts permanent would cost an additional $1.9 trillion by the end of 2014.
In the conference committee, House and Senate Republicans added about $13 billion worth of business tax breaks, the biggest of which was a renewal of the investment tax credit for research and development.
House Republican conferees also rejected a proposed amendment by Sen. Blanche Lincoln, D-Ark., that would expand the number of poor families eligible for a refundable child-tax credit. That measure would have cost $4.2 billion over 10 years.
According to studies by Democrats on the Joint Economic Committee, 4 million low-income families will not benefit from the child tax credit as the law is currently written.