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Budget deal edges toward final approval

Published Oct. 18, 2005

House and Senate negotiators spent Friday shaping the final details of a compromise budget bearing about $140-billion in new taxes. When enacted, the bill is to be the heart of an effort to shrink the deficit. Passage of the budget package would ease the way for an end to the long and troubled congressional session.

The package nearing completion contained a jump in the federal gasoline tax to 14 cents a gallon from 9 cents. New taxes also would be aimed at alcohol, tobacco, furs and costly private planes.

The ballooning costs of Medicare would be reined by $44-billion over the next five years. Most of the reductions would be in payments to doctors and hospitals, but $10-billion of the cuts would come directly from the elderly and handicapped people the program serves.

Their monthly premiums for doctors' coverage would swell from $28.60 this year to $46.50 in 1995, and their annual deductible would be bumped from $75 to $100.

For the upper-middle class, the 1.45 percent payroll tax that supports Medicare _ now deducted only up to $51,300 in earnings _ would extend to a person's first $125,000 of income.

People earning more than $100,000 annually would lose some of their income-tax deductions and face a phaseout of the $2,050 personal exemption.

The income-tax rate on the 600,000 richest Americans would rise from 28 percent to 31 percent. The top rate on the 4-million next most well-to-do _ individuals earning more than about $80,000 _ would drop from 33 percent to 31 percent.

Cuts would also be made in programs ranging from agriculture to student loans.

There were some expansions, for example, in the Medicaid program, which helps the poor afford medical care. There was new spending for home care of low-income elderly and services for children, and new protections against abuses by companies that sell health insurance to senior citizens.

Foreign aid bill

forgives Egyptian debt

House and Senate negotiators agreed on a new foreign-aid bill that enables President Bush to forgive Egypt's $6.7-billion military debt, but sharply cuts U.S. aid to El Salvador in line with earlier votes in Congress.

The Egypt initiative was the administration's top priority in the $15-billion bill. Nevertheless, it remained unclear late Friday whether its inclusion would be enough to forestall a presidential veto over the Salvadoran-aid cut.

Egypt will not have to make further payments on the debt, which was incurred between 1979 and 1984 buying U.S. military equipment on credit.

However, the debt will not be forgiven until the president has followed a series of procedures, ending with a report to Congress certifying that forgiveness is in the U.S. national interest.

In accordance with earlier votes in the House and Senate, the negotiators withheld half of El Salvador's $85-million military aid for 1991 unless the Farabundo Marti National Liberation Front refuses to negotiate a peace settlement. If the government breaks off peace talks it would lose all the aid. The purpose is to apply pressure on both sides to keep talking, but the Bush administration has strongly opposed the restrictions.

In other provisions, the bill pointedly omits any specific earmark for Pakistan, which in past years has been the third-largest recipient of U.S. aid. In fact, it erects new hurdles before aid can be granted, including certification that this week's elections were free and fair and restoration of full civil liberties.

Israel is the top beneficiary of the bill with some $3-billion in cash military and economic aid, and millions more in non-cash benefits. The conferees agreed to include a section that would let the United States give Israel up to $700-million worth of new weaponry from Pentagon stocks.

In addition to the debt forgiveness, Egypt is the second-largest cash aid recipient, with $2.1-billion. The money for the two Middle Eastern countries stems from their Camp David peace accord and their status as staunch U.S. allies in the region.

The unearmarked portion of the bill provides a total of $3.1-billion for economic aid and $4.6-billion for military aid. Congress is giving the administration more latitude than usual to decide how to distribute the money.

But lawmakers did include specific earmarks for several favored countries: Jordan, $35-million in economic aid; Morocco, $20-million in economic and $43-million in military aid; Greece, $350-million in military aid; Turkey, $500-million in military aid; and $62.5-million in economic aid for Peru, Bolivia and Colombia.

The bill also includes $800-million for sub-Saharan Africa, $7.5-million for Lebanon, $20-million for Ireland, $364-million for Eastern Europe and up to $20-million for humanitarian and development aid in Cambodia.

The Philippines would get $160-million for this year's payment on a five-year, $1-billion aid program called the Multilateral Assistance Initiative. That is $40-million less than the administration had asked, and the same as last year's amount.

Defense bill would

keep "stealth' bomber

Congress has passed and sent to President Bush Friday bills for a $288.3-billion 1991 defense program.

The bills would keep alive the "stealth" bomber, would reduce spending on the Strategic Defense Initiative and shift that money to more planes and ships for crises like the one in the Persian Gulf.

The Senate passed two defense bills. The first authorizes the government to spend $288.3-billion on defense. The second makes most of that money ($268.1-billion) available. Congress must authorize programs and appropriate money for them with separate bills.

The bills also allow Defense Secretary Dick Cheney to begin spending the first $1-billion in contributions from other countries on military operations in Saudi Arabia.

The bills include $4.1-billion to keep the radar-evading B-2 bomber alive for at least another year, but the House voted this year to halt production at 15 planes.

Cheney wants 75 of the bombers at an estimated cost of $63-billion. Supporters were able to keep that program alive this year with a vague compromise that House members said keeps production at 15 but senators said allows Cheney to begin building two more.

The bills also cut Bush's $4.7-billion request for "Star Wars," to $2.9-billion. The Air Force said such a cut would delay the earliest possible development of a first phase Star Wars defense shield by two years.

Briefly . . .

The House approved the clean air bill Friday night, the first change in air pollution laws in 13 years. The clean-air requirements are expected to have widespread effects on society. Consumers are likely to pay slightly more for automobiles as well as gasoline and, in many of the Midwestern states, more for electricity.

President Bush put 3,000 miles between himself and the Congress by flying to the Pacific Coast Friday to campaign for Republicans. Bush said that if the American people don't like the higher taxes that are coming out of the talks they should blame the Democrats in Congress and vote them out of office.

As Congress was putting together the new budget, the Treasury Department announced the bad news left over from the old one: The federal deficit soared to $220.4-billion, the second-highest ever, in the fiscal year ending Sept. 30. It was the 21st straight year in which the government spent more than it took in.

House and Senate negotiators neared agreement on an omnibus crime bill Friday. The measure does not contain death penalty or assault weapons provisions.

The House approved on a voice vote and sent to the Senate a bill toughening sanctions against banks and savings and loans convicted of laundering money for drug dealers.

_ Information from the Associated Press, Reuters, the New York Times, the Los Angeles Times and the Washington Post was used in this report.