Gop Lawmakers Prepare for Battle within Ranks Economic Policy Pits Conservatives against Moderates

Article excerpt

AMID THE PUBLIC displays of post-election euphoria and unity, the Republicans who will assume control of Congress in January are quietly positioning themselves for what they expect to be a bitter intraparty battle over tax and budget policy.

The economic policy dispute pits moderate Senate Republicans against more ideologically conservative House GOP leaders and seems certain to reveal deep divisions within the party that had appeared to have been closed by this month's electoral triumph.

The outcome could determine the success or failure of the Republican campaign to turn Congress into a weapon capable of bludgeoning Washington into accepting radical change.

The new House leaders, led by likely Speaker Newt Gingrich of Georgia, are interpreting their electoral sweep as a mandate for a reversal of President Bill Clinton's economic policies and a return to Republican supply-side theory.

The Gingrich camp, energized by its success at gaining control of the House for the first time in 40 years, so far has managed to frame the terms of the economic-policy debate with its "Contract with America."

The sweeping agenda calls for tax cuts for corporations and individuals, an increase in outlays for defense, less spending on welfare and other domestic programs and a balanced-budget amendment to the Constitution. Incoming House Majority Leader Dick Armey, R-Texas, who shares Gingrich's zeal for supply-side theory, says he views the Republican strategy on taxes as an effort to launch a "frontal assault on big government."

The contract also calls for congressional term limits, tougher federal criminal-sentencing laws and a ban on placing U.S. troops under U.N. command. But at heart, it is a conservative economic manifesto, a loud restatement of Reaganomics.

The volume might turn out to be a little too much for Senate Republicans. Generally far less ideological than their House counterparts, some GOP senators say they find the budgetary and economic arithmetic behind the contract frightful.

Many agreed with the Clinton administration's assessment that the contract's mix of tax cuts and new defense spending would cause the federal budget deficit to balloon, largely because many of the offsetting spending cuts laid out in the contract would be nearly impossible to pass through both the House and Senate.

What's more, the proposal for a balanced budget amendment would force far deeper cuts, putting Republicans into a fiscal straitjacket for the remainder of the century. The conflicting signals on budget and tax policy could prompt the Federal Reserve Board to raise interest rates, slowing the economy and widening the deficit even more.

"The big issue that will very quickly confront the House Republicans is that if they want these big tax cuts, they are going to have to pay for them. If this contract is perceived as worsening the deficit, that will drive interest rates up, and that would negate any economic stimulus you might get from cutting taxes," said Barry Bosworth, an economist and budget analyst at the Brookings Institution, a think tank in Washington.

Faced with that kind of picture, Senate moderates are likely to force House Republicans to set priorities. Because they cannot do everything in their contract at once without courting fiscal disaster, the argument goes, they will have to choose which elements they want the most. …