HEY, BILL, THAT'S OURS!

By Karen Tumulty/Washington

Usually it's a failure at damage control that trips up the Republicans. Whether the issue has been funding disaster aid or shutting down the government, the G.O.P. Congress has managed to double its losses--first by picking the wrong fights with Bill Clinton and then by not giving up when it came out the loser. Now, as both sides prepare for what could be a month-long battle over how to shape the first tax cut in 16 years, Republicans face an entirely new question: Are they smart enough to know when they've won?

Clinton stepped forward last week with his own tax-cut plan, one that by most indications could have been lifted straight from the G.O.P.'s 1994 Contract with America. The measure would cut capital-gains taxes, reduce the estate tax, create education savings accounts similar to IRAs and extend a proposed tax credit for children to cover teenagers as well. The Clinton package was a significant step in the direction of the competing plans that had passed both the House and the Senate the previous week. And yet even as Republicans tried to sound magnanimous, hints of resentment kept creeping in. With the air of a hostess who has suddenly chanced upon a badly dressed party crasher, Texas Senator Kay Bailey Hutchison sniffed, "I don't think it's quite fair for the President to come in with changes that are not in either the House or the Senate bill."

For if there is anything Republicans want more than simply to win the argument, it is to hand a loss to Bill Clinton. And now, having seized the center on welfare reform, the budget and other G.O.P. causes, the President threatens to outflank the Republicans again--this time on the one piece of ideology that holds the party together. Tax cuts, declared Speaker Newt Gingrich in 1995, were the "crown jewel" of his Contract with America.

So Clinton, having reneged on his 1992 campaign promise of a tax cut for the middle class, walked right into the Republicans' den and declared their treasure his. The best measure of his surefootedness was the way he unveiled his proposal: he picked the first day of Congress's July Fourth recess, guaranteeing the stage to himself and leaving the Republicans to rebut him with two junior members of their congressional leadership.

With the President having moved such a distance, what is there left to fight about? Plenty, it turns out, and in the p.r. battle, Clinton seems to have the advantage. For one thing, a narrow plurality of the public say they have more confidence in Clinton than in congressional Republicans on the tax issue, according to a CNN/USA Today/Gallup poll released last week. Clinton's 43%-to-40% edge is a startling turnaround in comparison with shortly after the 1994 election, when the public that had handed control of Congress to the Republicans rated the party 22 points ahead of the President on handling the issue. The change partly reflects the verdict of most independent analysts, who say Clinton's measure is a better deal for the middle-class taxpayer than what the House and the Senate are offering. And when the argument turns to the details of the various proposed tax breaks, Clinton has positioned himself as the champion of hardworking parents: while he pushes his education tax credits, for instance, the same Republicans who wanted to close the Education Department will be fighting to index capital-gains taxes so that investment profits can be insulated from inflation.

The stickiest issue to resolve between Congress and the White House is the question of whether low-income workers should get the $500-per-child tax credit. Republicans will argue that refunding these Americans more than the amount they pay in income taxes is not a tax cut but welfare. So Clinton operatives are scouring key congressional districts for real-life examples of such "welfare" recipients, lining up teachers, police officers and social workers. Clinton can also point out that the Republicans themselves, in their Contract with America, advocated giving the tax credit to the working poor. It's not hard to figure out who wins that fight.

Republicans have begun to contemplate the scenario that is their ultimate nightmare: "He could get away with vetoing a Republican bill and saying he wanted his kind of tax cuts and win," says David Mason, the conservative Heritage Foundation's leading congressional scholar. "I could get in trouble with my Republican friends for saying so, but it's true." No wonder there are few G.O.P. voices still arguing for confrontation. As a Republican strategist put it, "The fact is, we're going to have to share credit with this guy. Then again, he's not on the ballot in 1998, and Republicans in Congress are." An odd consolation for a party that rode to power in 1994 by turning a congressional election into a referendum on the President.

--With reporting by John F. Dickerson/Washington

With reporting by John F. Dickerson/Washington