"What's That I Heard About Lame Duckery?"

By Amy Wilentz.

The rebellious Republicans grew still after the President entered the room. Ronald Reagan had just returned from a memorial service at Fort Campbell, Ky., and the pall carried over to the gathering on Capitol Hill. There was a moment of silence for the 248 soldiers of the 101st Airborne Division who died in the Arrow Air crash two weeks ago. Then it was down to business. More than 160 G.O.P. Congressmen were eager to explain why they had voted to prevent consideration of a bill drastically overhauling the nation's tax code, and the President was just as eager to persuade them not to kill his "No. 1" domestic priority and leave him crippled by a revolt in his own party.

The bill, the Republicans told Reagan, did not reflect his original tax- reform plan. It had been usurped and ideologically warped by the Democrats, they said. Reagan listened patiently. Then he pulled out a packet of index cards and began a prepared response. He understood the Congressmen's concerns. He too would oppose the bill -- if it were unchanged in the final version. But for the process to continue, the bill must be passed and sent to the Senate, where it could be improved. If killed in the House, there would be no second chance.

In the end Reagan showed yet again why it is foolhardy to underestimate his persuasive powers and prematurely proclaim him a lame duck. Despite the obituaries written after the Republican revolt six days earlier, the most far- reaching tax-reform plan since World War II passed the House last week and was sent to the Senate, which will take it up in 1986. The surprising bipartisan triumph by Reagan and Democratic Ways and Means Committee Chairman Dan Rostenkowski came during the prolonged and hectic finale of a year otherwise distinguished chiefly by the achievement of new levels of fecklessness in dealing with, or failing to deal with, the federal budget process.

When the President launched his crusade for tax reform in May, he issued a challenge: "America, go for it." But the sweeping effort to slash rates by eliminating major tax breaks was eyed warily by a Congress that often seems beholden to special-interest groups. In the House, Reagan formed an awkward alliance with Rostenkowski, who proceeded to bargain with colleagues to produce a bill that preserved the thrust of the President's proposal but was speckled with special favors designed to make it politically palatable.

The House measure reduces the number of tax brackets from 15 to four, cutting the top rate from 50% to 38%, not quite the 35% Reagan had requested. In doing so, it preserves some politically popular deductions that the President had proposed doing away with, including mortgage payments on second homes and taxes paid to state and local governments. The personal exemption would be raised from $1,080 to $2,000 for taxpayers who do not itemize their deductions and to $1,500 for those who do. The bill would also impose a stiffer minimum tax on corporations and eliminate many business breaks. When Rostenkowski finally produced his version, Reagan vacillated for two weeks before issuing a lukewarm endorsement.

His hesitation set the stage for the revolt among House Republicans, who resented waiting in the wings while the White House performed a pas de deux with Rostenkowski. Abandoning efforts to recast themselves as the party of the average workingman, many Republicans blasted the bill as "antibusiness." Two weeks ago, a coalition led by New York Congressman Jack Kemp, a longtime advocate of tax cuts, along with Minority Leader Robert Michel and Republican Policy Committee Chairman Richard Cheney spearheaded a move to keep the bill from being voted on by the full House. All but 14 Republicans joined the revolt.

House Speaker Tip O'Neill declared that he would not bring the bill up again unless Reagan could personally guarantee that 50 Republicans would give it their votes. It was a dramatic dare issued to a President capable of dramatic actions, and it worked. Reagan decided not only to make his pilgrimage to the Hill but to lobby by phone and in small meetings.

After his convocation of House Republicans on Monday, Reagan was still at least ten votes short. But he picked up the support of Kemp, who extracted a letter from the President that helped bring other members around. In it Reagan pledged to veto the bill unless the Senate cut the top rate back to 35%, extended the $2,000 personal exemption to all low- and middle-income taxpayers and protected incentives for business investment.

Despite cries from some Democrats to let the bill die and blame the Republicans, O'Neill kept his end of the bargain and worked hard to prevent Democratic defections. The Democrats, he argued, had historically been identified with making the tax code more fair and would gain nothing from partisan finger pointing. In an unusual gesture for a House Speaker, he took the floor to plead the case for tax reform. "In my 33 years," he said, "we have never come this close."

Late Tuesday night the House approved the critical procedural motion to consider the bill by a vote of 258 to 168, with 70 Republicans in favor. Final passage came as a confusing anticlimax. O'Neill, as is customary, called for a voice vote, declared the "ayes have it" almost in the same breath, then waited for the usual demand for a roll call. The opponents, in disarray, said nothing. "I can't believe this," O'Neill murmured. Finally, he wielded his gavel. Admitted Republican Vin Weber, one of the opponents: "We were asleep at the switch."

The next morning, at a White House ceremony that included Rostenkowski, Kemp and leaders of the House and Senate from both parties, Reagan exulted in his % victory. Said he: "What's that I heard about lame duckery?" Still, the President had come perilously close to a major defeat, and at the hands of his own followers. His salvage operation rescued him from a legislative wipe- out, but only Rostenkowski came out of the tax-reform struggle a clear political winner.

House passage of tax reform emerged during a characteristically messy final week (dubbed "the recess express" by one House aide). Typical of the chaos was the debate over a deficit-reduction plan and the budget for fiscal 1986, which began Oct. 1. The Senate included a business tax to finance a renewed $10 billion Superfund to clean up toxic wastes. Reagan, reflexively opposing any new tax, threatened to veto the bill. The House eliminated the tax. When the bill went back to the Senate, Finance Committee Chairman Robert Packwood, a Republican, vowed to filibuster it if there were no tax for the Superfund. As the game of Ping-Pong proceeded, members began drifting to their free parking spots at Washington's National Airport to get home early for the holidays, leaving the chance of reducing the deficit in the lurch.

The spectacle of a Republican President threatening to veto a bill if it included certain revenues, and a Republican Senate finance chairman threatening to filibuster if it did not, was certainly strange. That standoff highlighted the potential paralysis that the Administration and Congress face next year in coping with the troublesome deficit-reduction bill sponsored by Senators Phil Gramm and Warren Rudman, which passed two weeks ago. It requires the deficit to be cut by some $60 billion next year, to $144 billion.

Nor does the confrontation between Packwood and Reagan bode well for the fate of tax reform. Packwood says it will be impossible for the Senate to devise a bill that complies with Reagan's pledges to House Republicans while retaining deductions for state and local taxes. Republican Leader Robert Dole was also skeptical. "The President may be running the risk of locking the Senate into something we cannot produce." Other congressional leaders, however, feel that the language in Reagan's letter to Kemp is ambiguous enough to allow for compromise.

The first priority for Packwood and Dole is to reduce the deficit, which may mean that tax reform will wind up on the back burner until next year's budget process is finished. Even worse, from the President's perspective, tax reform could become entangled in the debate over revenue measures to trim the deficit. The prospect of any tax increase, the President warned again last week, gets him itching for his veto pen. But Reagan is working hard to regain his momentum, and tax reform is his darling. He is clearly not ready to become a lame duck anytime soon.

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With reporting by Laurence I. Barrett and Barrett Seaman/Washington