WASHINGTON -- Senate Budget Committee Chairman James Sasser yesterday proposed major revisions in the 1990 budget agreement to permit an immediate $30 billion tax cut for the middle class.

In calling for action on tax-cut legislation before Congress adjourns this year, the Tennessee Democrat joined the ranks of most House and Senate leaders, as well as White House officials, who in the past week have endorsed passing tax cuts to stimulate the sagging economy.

But his call for modification of the budget agreement to offset proposed tax cuts with defense cuts puts him squarely at odds with his counterpart in the House, Budget Committee Chairman Leon Panetta, D-Calif.

Rep. Panetta yesterday repeated his warning against a "tax-cut auction" that would lead to the abandonment of the agreement.

"Unfortunately, the administration's promise of new tax cuts has set off a bidding war, one that both parties have joined" and that could cause "an unmitigated disaster for our economy," he said.

"They are forgetting the budget agreement, the only fiscal discipline we have at the federal level," he continued. "Under that agreement, you can only cut taxes if you are prepared to pay for it with new revenues or cuts in entitlement programs" such as Medicare of farm supports.

Paying for Sen. Sasser's proposed $30-billion, one-time tax cut with defense reductions would require a major modification of the agreement. The tax cut, which the senator envisions for January, also would not be paid for right away -- as the pact requires -- but only as the $70 billion to $80 billion of defense cuts are phased in over five years.

"That way we would not be stimulating the economy and inducing contraction at the same time," he said.

The senator, one of the chief budget negotiators last year, said that in providing for eventual payment his plan adheres to the "spirit" -- if not the "letter" -- of the agreement. The plan would contribute about $30 billion of the proposed defense cuts to deficit savings, he said.

Another major change his plan would require in the agreement is a shift of between $10 billion and $20 billion from defense to domestic programs, such as infrastructure, in the next five years.

"I'm calling for modification of the agreement to give flexibility to deal with the economy," he said. This could be done through the usual congressional procedures without convening another budget summit with the White House, he added.

Sen. Sasser predicted that President Bush would eventually agree to the additional defense reductions in combination with a tax cut, as would other leaders of Congress -- most notably House Ways and Means Committee Chairman Dan Rostenkowski, D-Ill. -- who have been wary about trying to pass a tax bill this year.

"I see all the ducks getting into line," he said. In proposing to cut defense by about 5% a year on top of the 25% defense reductions slated under the agreement, Sen. Sasser's plan is similar to a tax-cut plan proposed earlier this week by Senate Finance Committee Chairman Lloyd Bentsen, D-Tex. Sen. Bentsen suggested expanding the Individual Retirement Account deduction and tax credits for children, ideas Sen. Sasser endorsed.

While both Democrats and Republican now seem bent on pushing through tax cuts this year, they are still far apart on whose taxes and which taxes to cut. The centerpiece of a White House-backed Republican plan is a cut in the capital gains tax rate which Democrats have resolutely resisted for years. Senate Majority Leader George Mitchell, D-Me., repeated his opposition to such a capital gains tax cut yesterday, though Sen. Sasser conceded that the tax cut package could include "business incentives for long-term investments."

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