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. Last Updated: 07/27/2016

Dole, Gingrich Agree on Budget Plan

WASHINGTON -- Senate Majority Leader Robert Dole and House Speaker Newt Gingrich reached an agreement on a compromise plan that would balance the budget by 2002, eliminate the Department of Commerce and hundreds of programs, and provide $245 billion of tax cuts.

The historic budget agreement, subject to final approval by the House and Senate next week, was designed to achieve nearly $1 trillion of spending savings over the next seven years.

Although the agreement does not spell out the details of the proposed tax cuts, Dole and Gingrich said late Thursday they would include a $500-per-child tax credit for most families, a reduction in the capital gains tax, a new Individual Retirement Account, the elimination of the marriage-tax penalty and business tax breaks -- key elements of the Republicans' "Contract With America.''

"Throughout the conference, Republicans have been unified in fashioning a budget which keeps our promise to return money and power to the American people,'' Gingrich told reporters. Dole said the tax plan would "put more money in the pockets of American families and provide incentives for savings, economic growth and job creation.''

The tax cut was the most contentious issue of the negotiations and could still complicate final passage next week. House GOP conservatives have pushed for a larger tax package, between $250 billion and $300 billion over seven years, while more than a dozen moderate Republicans in the Senate have resisted tax cuts in excess of $170 billion. Asked whether he was confident he had the votes to pass the budget compromise, Dole replied: "I hope so.''

Under terms of the compromise, the congressional tax-writing committees cannot begin work on a tax bill until Congress has completed work on the spending-cuts package this fall and the Congressional Budget Office certifies that it is in balance.

The budget compromise emerged after three grueling weeks of talks by congressional leaders.

It provides a seven-year blueprint for achieving a balanced budget by substantially downsizing the bureaucracy, slashing or eliminating hundreds of programs, and slowing the growth of spending. However, the budget plan is only a guide, and the appropriations, tax-writing and authorizing committees must take action between now and October 1, the start of the new fiscal year, to make the actual cuts.

While overall spending will continue to grow, Republicans are betting they can simultaneously balance the budget, cut taxes and slightly increase defense spending by slowing the rate of spending growth in other areas and reaping the benefit of a $170 billion "fiscal dividend'' of reduced interest costs.

Nearly 60 percent of the total projected savings would come through changes or cuts in Medicare and Medicaid, food stamps and other social-welfare entitlement programs.