Emergency funds may be last hurdle before budget vote

Congressional negotiators agree on $1.35 trillion tax cut

From CNN's Major Garrett, Ted Barrett and Dana Bash

WASHINGTON (CNN) -- A final budget agreement with a $1.35 trillion tax cut could be reached when White House and Congressional negotiators reconvene Wednesday morning, if they can resolve a dispute over how "emergency" appropriations can be spent.

If an agreement is reached on that issue, the House will vote on the measure Thursday, a House leadership aide said.

House and Senate Republicans agreed Tuesday to cut $1.35 trillion over 11 years, with an $100 billion retroactive cut this year designed to stimulate the economy.

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Congressional and White House negotiators late Tuesday also tentatively agreed to increase discretionary spending about 5 percent -- or about $667 billion -- for next year, according to several participants in the talks, including Bush congressional liaison Nicholas Calio and Sen. Pete Domenici, R-New Mexico, the Budget Committee chairman.

The 5 percent increase in spending from last year's $635 billion exceeds Bush's hope to limit increases to 4 percent. But it is well below the 8 percent increase in spending passed by the Senate.

A still-undefined supplemental or emergency spending bill is also expected to be included in the final measure, although the participants refused to put a price tag on that bill. Spending-wary conservatives want strict language that will confine emergency spending to real emergencies like floods and earthquakes, aides said.

During a brief Rose Garden news conference, Bush said the budget agreement represented a "great day" for American taxpayers. He suggested Democrats have signed onto the deal as well.

"Today, Republicans and Democrats have agreed to help Americans send their children to college, pay off their mortgages a little faster, or cope with rising energy costs," Bush said. "In short, once we funded our nation's priorities, we've agreed to let the American people spend their own money on their own priorities."

The agreement is less than the $1.6 trillion tax cut Bush originally proposed but close enough for the White House to claim a substantial victory. Budget Director Mitch Daniels has been intimately involved in the House and Senate negotiations.

Sen. John Breaux, D-Louisiana, a key moderate who helped bring 15 Senate Democrats to support a $1.2 trillion tax cut, said the $1.35 trillion compromise is acceptable because "everybody wins."

He spoke to Bush about the agreement by cell phone, standing outside a Democratic caucus lunch.

Sen. Lincoln Chafee, R-Rhode Island, who was opposed to Bush's $1.6 trillion tax cut, says he has not decided whether he will vote for the $1.35 trillion compromise.

The spending question is crucial on several fronts, including defense, education, the environment, transportation and other programs.

If Bush fails to win a spending number in the budget resolution he favors, he may veto spending bills passed by a Republican Congress, just the kind of confrontation the White House and congressional GOP leaders would rather avoid.

If the spending number is perceived by some Republicans as too low, it might mean key spending bills will be bogged down and left hanging by the end of the fiscal year.

That would create pressure to cut a last-minute deal in which the White House would face a choice of agreeing to higher spending or imposing selective shutdowns of government agencies, another scenario Republicans wish to avoid.

All of this underscores the high-stakes nature of the talks on spending, where consensus -- even among Republicans -- has proved far more elusive than on tax cuts.

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The White House
 • U.S. President George W. Bush
U.S. Office of Management and Budget
U.S. Congressional Budget Office

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