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President Bush reverses campaign pledge, accepts need to raise taxes

By BUD NEWMAN

WASHINGTON -- President Bush's decision to accept a tax increase to help slash the federal deficit spurred Democratic budget negotiators Wednesday to respond with a long list of possible cuts in programs popular with Democratic constituencies.

'Whatever the deadlock was on negotiations seems to have disappeared,' said Sen. Pete Domenici, R-N.M., who joined in what participants called a more 'free-ranging' discussion about possible deficit cuts than has occurred since talks began May 15.

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One negotiator said attitudes were so relaxed Wednesday that for the first time participants felt comfortable using the word 'taxes.'

At the White House, Bush press secretary Marlin Fitzwater said Bush 'feels he did the right thing' in issuing his tax statement Tuesday.

'He is comfortable with his decision. He did what he had to do,' Fitzwater said. 'He thinks the deficit needs to be solved. He thinks the American people understand that. The challenge is now to come up with a plan.'

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Senate Budget Committee Chairman James Sasser, D-Tenn., said Democrats were rewarding Bush for opening the door to new taxes by raising a difficult political issue for Democrats -- cutting entitlement programs such as Medicare, farm programs and other federal payments set by formula.

'The president raised the issue of taxes, which I think is very sensitive for the administration and for the Republicans generally,' Sasser said.

'Today, we Democrats are raising the whole question of entitlement payments. That's a very sensitive area for Democrats so we're trying to be evenhanded about it, tit for tat.'

He said 'the whole host of entitlements, running all the way down from Medicare reductions to reductions in various federal employee health benefit plans' were being discussed but that 'we've got a ways to go.'

Other budget summit participants said after talks ended for the day that virtually every entitlement program -- including a politically volatile freeze on annual Social Security cost of living increases -- was discussed in the context of how much money could be saved if reductions were made.

Sen. Robert Packwood, R-Ore., said discussions about possible entitlement cuts also included food stamps and other programs aimed at poor people.

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Sen. Wyche Fowler, D-Ga., a negotiator, said while participants talked about cuts that could be achieved, 'nobody has said yet (that) this is a proposal that I think should be done.'

'We have not reached that stage yet -- we could (Thursday),' he said.

However, before the afternoon negotiating session began, House Budget Committee Chairman Leon Panetta, D-Calif., said he and House Democratic leader Richard Gephardt of Missouri, the chairman of the talks, would offer new proposals to cut entitlements.

Panetta said he also had new proposals on defense spending cuts but participants said defense did not come up.

The Panetta-Gephardt proposal was the first Democratic-sponsored plan to be offered as the bipartisan budget talks entered their sixth week.

'What I want to do is explore the entitlement area and see whether we can make some changes there,' said Panetta, who suggested increasing entitlement cuts from the $3.8 billion contained in a House-passed budget plan to about $5.6 billion.

'I think it's time that we get down to serious negotiation,' Panetta said. 'Gephardt and I are basically going to start the discussion.'NEWLN:Panetta said Bush's statement Tuesday that 'tax revenue increases' were among the elements needed in a serious deficit reduction plan 'basically cleared the way' for him to present his proposals.

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The Senate by voice vote passed a non-binding resolution urging Bush and the negotiators to consider recommendations made by several groups to eliminate waste in government programs before turning to increased taxes.

The compromise language, proposed by Sen. William Cohen, R-Maine, averted a roll call vote on an amendment by Sen. Jesse Helms, R-N.C., which would have been the first test of Senate sentiment on higher taxes.

House Speaker Tom Foley, D-Wash., expressed hope that agreement on a deficit pacakge could be reached by mid-July.

'The president's statement ... will permit an increase in minimum activity in the budget summit,' Foley said.

Sen. Phil Gramm, R-Texas, said Bush's statement on taxes was 'intended to make it easier for the Democrats to come forward with a new proposal.'

'The bottom line is it's time to summit or get off the pot,' Gramm said.

Democrats have insisted that Bush -- who pledged 'read my lips -- no new taxes' in the 1988 campaign -- had to be the first to blink on the explosive issue and demanded that he be the first to put a budget plan on the bargaining table to help slash a deficit that could reach a staggering $250 billion next year.

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He has now done both.

Foley said he is unconcerned that some House Republicans began circulating a letter to Bush Tuesday vowing to fight any tax hike. At least 90 House Republicans -- a majority of the 176 GOP House members -- signed the letter.

Foley insisted, however, that 'a deficit reduction package requires the votes of a majority of both parties.'

'Members have got to see the (final deficit reduction) proposal in its whole form' before making up their minds, Foley said.

And they must decide between that package including new taxes and the alternative -- steep, automatic, across-the-board spending cuts split

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