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Senate pares Bush tax-cut plan by $400 billion

Cheney and Lott
Vice-President Dick Cheney and Senate Majority Leader Trent Lott  

WASHINGTON (CNN) -- The Senate approved a fiscal 2002 federal budget resolution Friday afternoon that includes a tax cut worth about $1.2 trillion over 11 years -- well short of the $1.6 trillion, 10-year package envisioned by President Bush.

The vote was 65-35 in the evenly divided chamber. All those voting against the non-binding resolution were Democrats, although they had mounted numerous successful efforts to reduce the size and scope of the Bush tax proposal.

Fifteen Democrats joined the Republicans to approve the legislation.

CNN's Jonathan Karl reports on the compromise that helped get the tax plan passed

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Republicans and White House aides earlier Friday acknowledged the tax-cut provisions would probably not meet Bush's long-held aspirations.

Although many Republicans held out hope that they could forge a deal with enough swing Democrats to boost the tax to at least $1.4 trillion, they could not strike an accord before the scheduled midafternoon final vote on the resolution.

The resolution sets a budget goal of $1.98 trillion for 2002, but there is some disagreement between Republicans and Democrats about the precise size of the tax cut, because the resolution does not specify a final figure.

The consensus figure seems to be about $1.2 trillion over 11 years.

A series of amendments approved over the course of three days of debate pared down the Bush tax cut in favor of such priorities as education spending and debt reduction.

Republicans declared shortly after the vote that they would take this hit now and prepare to bring a larger tax-cut bill to the floor later.

What is a budget resolution?

Congress' yearly budget resolution is a non-binding document that sets the stage for the wider annual federal budgeting process. It is not a law and the president is not required to sign it.

The document sets the parameters that 13 subcommittees in the House and Senate then follow as they decide on appropriations for the next fiscal year. It also gives the go-ahead to the Congress' tax-writing committees to craft legislation covering proposed decreases or increases in taxes.

"I applaud the Senate's action, and thank the Republicans and Democrats who helped make it happen," Bush said at the White House.

The next step, Bush said, is for the House and Senate to convene a conference to iron out the differences between their disparate versions of the budget resolution.

The House passed a resolution in March that included language covering all $1.6 trillion of Bush's tax package.

The result of the conference, Bush confidently told a gathering in the East Room of the White House, "will be the largest tax relief in decades."

"When the House and Senate complete their work," Bush said, "they will have paved the way for the American people to receive an across-the-board tax reduction, elimination of the 'marriage penalty' and elimination of the 'death tax.'"

"This is a legislative process," said Vice President Dick Cheney, who was on hand for the vote in his role as president of the Senate. "It's a give and take process.

"I'm delighted, as is the president, with passage of the budget resolution this afternoon," Cheney said. "It is an indication of the extent to which we can continue to work together to make progress."

Senate Majority Leader Trent Lott, R-Mississippi, described the approval as a "bipartisan success," saying Friday's was the only truly bipartisan vote for a budget resolution he had ever seen.

Democrats, on the other hand, said they had defeated the president outright, and did so because he refused to negotiate with them early.

"We have said form the beginning that if he would work with us we could reach a bipartisan compromise," said Senate Minority Leader Tom Daschle, D-South Dakota. "He chose not to, and he got beat."

"Who would have thought that when we began this week, we would have ended in this way?" said Kent Conrad of North Dakota, the ranking Democrat on the Budget Committee, who led the debate on the floor.

"Democratic amendments led to a package with a smaller tax cut, far more resources for paying down the debt and strengthening education, and for strengthening national defense," Conrad said.

Nonetheless, Conrad described this version of the budget resolution as "deficient," saying the tax cut was "still too high."

Last-minute flood of amendments

White House legislative liaison Nicholas Calio, Cheney and other key members of the administration stayed active on the Senate side of the Capitol through Thursday and into Friday, trying to persuade moderate Republicans and some potential swing Democrats to join the president's effort. Despite offering a series of concessions, their efforts did not bear fruit.

In a flurry of votes on the budget resolution taken Thursday night, senators alternately added and subtracted money for the tax cut, resulting in a figure of approximately $1.2 trillion when they adjourned for the night.

That is the close to the figure recommended in a compromise package presented by Louisiana Democrat John Breaux that gained the support of one key Republican defector -- Sen. Jim Jeffords of Vermont -- whose demands for increased education funding exerted crucial influence on the week's budget and tax debate.

The Senate reconvened Friday morning to finish work on the budget plan and held a series of votes on several amendments to add funding for several core programs.

Included was an amendment by Minnesota Democrat Paul Wellstone to include an additional $1.7 billion for veterans' health care, which passed 53-46.

Movement through the rest of Friday's debate was slow, with floor action often grinding to a halt so that last-minute negotiations could take place away from the floor.

On Thursday night, the Senate approved a measure to take $70 billion from the tax cut to fund special education programs. The move was designed to appeal to Vermont's Jeffords to woo him back to the Republican fold, but aides said Jeffords believed the sum was still too small. He had been pressing the administration for $180 billion.

According to a Jeffords aide, Jeffords wrote Cheney rejecting White House overtures after a final meeting with the vice president on Thursday left the senator unconvinced the special education program would be fully funded.

In the end, Jeffords voted for the resolution Friday afternoon.

Next stops

Republicans won a victory Thursday night when the Senate approved an amendment to the resolution allowing application of so-called "reconciliation" rules to the budget.

The measure could be essential in GOP efforts to revive Bush's tax-cut levels later in the budget process, because it allows the tax-writing Finance Committee to write a bill shielded from Democratic procedural delays during debate.

The reconciliation bill could come to the floor in later weeks. Democrats objected to the move, saying it was an abuse of the budgeting system, but Republicans pushed it through nonetheless 51-49.

Senate Budget Chairman Pete Domenici hinted after the final vote Friday that the GOP may see reconciliation as its ace in the hole.

"Nobody can filibuster it, nobody can delay it," he said.

The Senate leadership could decide to resurrect the full $1.6 trillion tax-cut proposal when the reconciliation bill is drafted, if an agreement is not struck with the Democrats.

Should an agreement be hammered out, it would have to come out of the House-Senate conference that will soon meet to bridge differences between the competing budget resolutions of the two chambers.

House Majority Leader Dick Armey, R-Texas, reacted to the Senate vote Friday by issuing a statement calling for more tax cuts than Bush's $1.6 trillion, not less, indicating the conferees appointed by the House may take a hard line on the level of tax relief.

"I believe that we need more, not less, tax relief to pull this struggling economy out of its nose dive, and will work to ensure that the final package gets the surplus out of Washington and into the pockets of taxpaying Americans," Armey said.

"The president's $1.6 trillion plan should be a floor, not a ceiling."

CNN's Ian Christopher McCaleb, Dana Bash and Ted Barrett contributed to this report.

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Sen. Jim Jeffords, R-Vermont
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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4:30pm ET, 4/16

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