On A Clear Day, You Can See A Budget Deal

House Republicans attack as treason Senate Republican talk of scaling back a $245 billion tax cut. House Speaker Newt Gingrich (R-Ga.) suffers an embarrassing setback when rebellious rookies sink a leadership-backed defense appropriations bill. And polls show that, increasingly, voters are convinced that GOP deficit-cutting plans are a radical raid on America's social safety net.

Given the turmoil, it's no surprise that the conventional wisdom increasingly says that the wheels are coming off the Republican Revolution. But while GOP troops are suffering their first real casualties in their war on the Welfare State, their balanced-budget mission remains alive and well. Indeed, even as squabbling Republicans regroup during Congress' Columbus Day recess, strategists on both ends of Pennsylvania Avenue see the emerging outlines of a budget pact that gives Republicans many of their key agenda items.

The reason: President Clinton and his GOP antagonists have significantly narrowed their policy differences, having concluded they have far more to lose from a budgetary blowup than from an 11th-hour accommodation. "When you start to piece things together, you have the makings of a deal," says a top Clinton adviser. Adds Representative James C. Greenwood (R-Pa.): "There will be a deal, and the deal will put laurels on Newt's head."

The key elements, as envisaged by the White House and Hill leaders: A balanced budget within seven or eight years, a tax cut of about $200 billion that would include a family tax break and a lower capital-gains rate, and Medicare savings of some $200 billion over seven years. The package is also likely to end the federal entitlement to welfare and Medicaid, hike Pentagon spending, and soften proposed GOP cuts in such domestic programs as education and environmental protection.

Such a deal would achieve far more than Republicans dreamed possible a year ago. "If you look at the big picture, we'd really accomplish quite a bit," says Stephen Moore, director of fiscal policy studies at the libertarian Cato Institute. Still, talk of compromise has some firebrands crying sellout. "Even tough talkers Gingrich and [Senate Majority Leader Bob] Dole appear to have sunk beneath the red-ink waves without so much as a gurgle," grouses David Rucker, director of Associated Conservatives of Texas, an activist group.

Can Dole and Gingrich keep their restless troops in line? Under a temporary truce, Clinton and the GOP agreed to keep the government running until mid-November. If there still isn't an agreement by then, Gingrich is raising the specter of letting the government default on its debts for the first time ever.

It may, however, prove easier for the GOP to horse-trade with the White House than to settle nasty internal squabbles. Maybe it's the curse of majority status, but Republican lawmakers suddenly are beginning to look for all the world like their old Democratic rivals--carving up one another over home-state pork and ideological fine points. One example: a huge $243 billion defense spending bill rejected by the House on Sept. 29. The vote followed a revolt by religious conservatives who failed to win a provision barring abortions in overseas military hospitals. They were joined by Democrats and some GOP deficit-hawks, who objected to buying more weapons than the Pentagon requested.

PRIOR COMMITMENTS. That battle does not even compare with the bitter haggling over taxes. House Republicans insist on a cut of no less than $245 billion. Dole triggered a round of recriminations just by conceding he doesn't have sufficient Senate votes because of resistance from moderates. "We're into the uglies, and it's going to get uglier before it gets pretty," says R. Bruce Josten, senior vice-president of the U.S. Chamber of Commerce and a key player in the deficit-slashing effort. Adds a top GOP budget strategist: "The President is sitting there fat, dumb, and happy, while we tear each other to shreds."

Behind all of this Republican discord is some not-so-subtle Presidential politics. Senator Phil Gramm (R-Tex.) is appealing to hard-liners by bludgeoning front-runner Dole as a compromiser. "It's time Republicans started living up to the commitments we made in the [1994] election," Gramm thunders. Dole needs to deliver results to promote his credentials as an effective leader. And Gingrich, who hasn't ruled out a '96 run, could enhance his standing with the right by forcing a confrontation with Clinton--and then by cutting a deal more favorable to the GOP.

Clinton has plenty at stake, too. By compromising, he wins credit for slashing the deficit while protecting seniors from harsh GOP cuts in Medicare and Medicaid. Sighs House Republican Conference Chairman John A. Boehner (R-Ohio), "We could get 99.5% of what we want, and Clinton will declare victory."

A firm deal is not yet at hand. There's always the danger that House conservatives may desert Gingrich as a matter of principle. And the bitter Dole-Gramm rivalry could produce gridlock in the Senate. Still, the odds are that when the final budget vote comes, Gingrich, Dole, and Clinton will conclude they have too much at stake to play a game of political chicken. It might not be the end of the welfare state, but war-weary GOP generals will have scored a big victory over government as we've known it.