The NYTimes > Washington > Deal in Congress to Keep Tax Cuts, Widening Deficit

The New York Times > Washington > Deal in Congress to Keep Tax Cuts, Widening Deficit:
"Putting aside efforts to control the federal deficit before the elections, Republican and Democratic leaders agreed Wednesday to extend $145 billion worth of tax cuts sought by President Bush without trying to pay for them.

At a House-Senate conference committee, Democratic lawmakers abandoned efforts to pay for the measures by either imposing a surcharge on wealthy families or closing corporate tax shelters.

'I wish we could pay for them, but this is a political problem and we have people up for re-election,'' said Representative 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; a four-year extension of tax breaks intended to reduce the so-called marriage penalty on two-income families; and a six-year extension of 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 Wednesday that 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, which is expected to hit $420 billion this year, a record. Mr. Bush has promised only to cut the deficit in half by 2009.

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 election nearing, Congressional Democrats said they would not let themselves be branded as supporters of tax increases, which would occur if the expiring provisions were not renewed.

With Democrats capitulating to the Republican majorities in both the House and Senate, the handful of Republican holdouts have quietly surrendered as well.

The Republican rebels - Senators John McCain of Arizona, Lincoln Chafee of Rhode Island and Olympia J. Snowe and Susan Collins of Maine - infuriated Mr. 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 will last longer and increase federal deficits more than a two-year extension that Republican Senate leaders offered this summer. The nonpartisan Congressional Budget Office has estimated that debt will climb by $2.3 trillion over the next 10 years, and that making all Mr. 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 Senator Blanche Lincoln, Democrat of Arkansas, that would expand the number of poor families eligible for a refundable child tax credit. That measure would have cost $7 billion over 10 years.

http://www.nytimes.com/2004/09/23/politics/23tax.html