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Congressional negotiators agree on $1.35 trillion tax cut

WASHINGTON (CNN) -- House and Senate Republicans have agreed to a tax cut of $1.35 trillion over 11 years, with an $100 billion retroactive cut this year designed to stimulate the economy.

"Republicans and Democrats today have proven we can work together to do what is right for the American people," President Bush said in a brief appearance Tuesday afternoon in the Rose Garden. He said he would "have to be diligent" to keep down the size of spending growth, but said he was "absolutely confident we will be able to fund the tax cuts."

The cut is less than the $1.6 trillion tax cut Bush originally proposed but close enough for the White House to claim a substantial victory.

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Highlights of Bush's 2002 proposed budget
 
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President Bush's federal budget for fiscal year 2002 (PDF format)
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Taxing and spending: Bush budget
 

Despite agreement on the tax cut, House and Senate Republicans remain deeply divided on government spending. House Republicans are demanding that the budget outline hold to Bush's proposed growth of 4 percent in domestic discretionary spending -- which does not include entitlement programs such as Social Security and Medicare.

Senate Republicans are pushing for more spending and some want to increase allocations in fiscal year 2002 by as much as 8 percent. Bush has denounced such spending levels as excessive.

Congressional sources say the two sides remain divided on the spending question. Meetings between key House and Senate players and Daniels are expected to last through the day. Congressional sources say the goal is to reach a deal on spending by Tuesday night and bring the compromise budget outline to the House floor by Wednesday and to the Senate floor by Thursday.

The spending question is crucial on several fronts. The budget number for spending provides room for all domestic spending -- including defense, education, the environment, transportation and other programs.

If Bush fails to win a spending number in the budget resolution he favors he may have to veto spending bills passed by a Republican Congress, just the kind on confrontation the White House and congressional GOP leaders would rather avoid.

If the spending number is perceived by some Republicans as too low, it might mean key spending bills will be bogged down and left unpassed by the end of the fiscal year.

That would create pressure to cut a last-minute deal in which the White House would face a choice of agreeing to higher spending or imposing selective shutdowns of government agencies -- also a scenario Republicans wish to avoid.

All of this underscores the high-stakes nature of the talks on spending, where consensus -- even among Republicans -- has proved far more elusive than on tax cuts.



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RELATED SITES:
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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