Senate approves balanced budget

Washington - The Senate last night approved a landmark resolution that would balance the federal budget by 2002, under a plan slashing almost $1,000bn (pounds 625bn) of spending over the next seven years but that offers no guarantee of the tax cuts demanded by the Republican House of Representatives, writes Rupert Cornwell.

After disposing of some 50 Democratic amendments by laborious voice vote, the Republican majority secured passage of the resolution - calling for deep cuts in health and welfare spending and the elimination of hundreds of federal programmes and the entire Commerce Department - by a comfortable 57 votes to 42. But its ultimate fate may be settled by the row over tax cuts, now inextricably entangled with the battle for next year's Republican presidential nomination.

On Tuesday, the Senate rejected an amendment by presidential candidate Phil Gramm that would have matched the $350bn of tax cuts passed by the House earlier this year, described by Speaker Newt Gingrich as the "crown jewel" of Republicans' Contract with America.

But that setback for the Texas Senator was no worse than the dilemma of his arch rival for the White House, the majority leader Bob Dole. Ever since the budget debate began in earnest, Mr Dole has been caught between moderate Senate Republicans insisting that the deficit must be eliminated before any consideration of tax cuts, and conservative "supplysiders" like Mr Gramm and Mr Gingrich.

In the Senate at least the moderates prevailed, as 23 of them combined with the 46 Democrats to rout the Gramm amendment by 69 to 31, a far wider margin than expected.