TAX CUTS AND CIRCUSES

By Karen Tumulty/Washington

From between the heavy draperies of House majority whip Tom DeLay's first-floor Capitol office, a bizarre scene could be glimpsed outside. In the normally quiet, heavily guarded parking lot, 13 elephants from the Ringling Brothers and Barnum & Bailey Circus were parading trunk-in-tail across the East Plaza, leading an entourage of dancing dogs and clowns on stilts. At the center of the mini-circus, a beaming Speaker Newt Gingrich shared a ring with a 14,762-lb. elephant named King Tusk. Touching off what would become a daylong stampede of inevitable jokes, the Speaker announced that the Capitol now had "the outer circus and the inner circus."

On this note of triumph and giddiness came the beginning of the end of the Republicans' first 100 days in power. But in DeLay's office there was little cause for celebration. The first vote on $189 billion in tax cuts was less than five hours away, and the G.O.P.'s chief vote counter was still 10 short of what he needed even to get the bill to the floor. What Gingrich dubbed the "crowning jewel" of the G.O.P.'s "Contract with America" was in jeopardy.

Ignoring the spectacle outside the window, two Republican Congressmen and four staff members sat around a table, working the phones. "Hey, we need some help with Metcalf," DeLay shouted. Across the hall Andrea Sheldon of the Traditional Values Coalition, an organization of 31,000 fundamentalist and evangelical churches, alerted the group's lobbyists to start calling the office of the freshman Republican from Washington State. Then she headed out the door to look for Jack Metcalf in person.

Ultimately, the Republicans prevailed by a comfortable 58 votes, largely in the interests of political solidarity. Now, as they face the next 100 days, G.O.P. leaders must confront the conflicting goals they have set: the ideological imperative of tax breaks and the public's mandate that they cut the deficit. Last week the party's leaders were startled by the effort that it took to win the contract's final big provision, the one that many had thought would be among their easiest. "I didn't think it could be this hard to cut taxes," moaned Ohio's John Boehner, chairman of the House Republican Conference.

What, after all, could be more popular than cutting $500 in taxes for every child born to a family earning $200,000 and under? Democrats dismissed the amount as trivial-enough to buy, maybe, a pizza a week. Yet for a family of four earning $40,000, the tax credit would be like a 3.5% pretax raise-more than many of them have been getting from employers.

For Gingrich the political stakes couldn't have been higher. "It's irrational to think you can hold together a center-right coalition if you don't increase the take-home pay of the workers who are part of your coalition," Gingrich told Time. And while polls generally show that less than 40% of the public would prefer tax cuts to deficit reduction, the Speaker noted that those who do "are all in our coalition."

Still, the trickiest question is, How will the G.O.P. pay for the tax cuts? They vowed to spell out their plans for financing the tax breaks, but two-thirds of the money raised by the bill would come from $177 billion in spending reductions yet to be specified.

Republicans are counting on their welfare-reform bill to generate more than $60 billion in savings to help pay for the tax cuts-a blatant shift from have-nots to haves that makes moderates uncomfortable. While the welfare bill would cut federal payments for children born out of wedlock, the tax bill would reward married people for having more children. Many who voted for the bill felt similar doubts about a provision that could set up enormous tax shelters for corporations, allowing them a far more generous write-off for buying new equipment.

Democrats said the bill was a return to the discredited trickle-down theories of Ronald Reagan that produced a $4.6 trillion national debt. Besides offering the family-tax credit, the bill cut capital-gains taxes for individuals in half and gave corporations breaks they had been seeking for years. All told, the Treasury Department estimated, more than half the tax cut would go to people earning $100,000 or more. Sneered Joseph Moakley, a Massachusetts Democrat: "From the mouths of babes to the pockets of billionaires."

Not so, countered the Republicans, who offered figures showing that the middle class would be the biggest winners. Outside experts were not persuaded that either set of numbers settled the question. "Fundamentally, if you know what you believe, you can find the facts to prove it," said Clint Stretch, who analyzes federal tax policy for the accounting firm Deloitte & Touche LLP. "This is a theological issue."

If so, right before last week's vote many of the G.O.P. faithful were feeling a bit weak of flesh. Almost half the House Republicans signed a letter arguing that the tax breaks should be narrowed so that they would only reach families earning $95,000 and less; a smaller but more influential group asked that they be contingent on meeting deficit-reduction targets. Gingrich rebuffed the first demand outright and overcame the second by agreeing to loosely tie the cuts to deficit goals.

The final vote was another display of the discipline that marked the long march through the 100 days-a lockstep both the scorn and envy of Democrats. But for some Republicans, it was a question of expedience and loyalty. "This is the conclusion of our 100 days," said Connecticut's Christopher Shays. "We want to end on a positive note." After all, Clinton has called the bill "a fantasy" and has threatened to veto it and other items in the Contract with America. Also, the bill now makes its way to the Senate, where deficit hawks such as Budget Committee chairman Pete Domenici and Finance chairman Bob Packwood have little enthusiasm for tax cuts. Or, as Bob Dole says, "The next 100 days will belong to the Senate." --With reporting by Nina Burleigh/Washington

With reporting by NINA BURLEIGH/WASHINGTON