President Bush signed emergency legislation Tuesday restoring business as usual for the federal government and said he was willing to raise income tax rates on wealthy Americans if a final budget included his long-sought cut in the capital gains tax.

Bush said he would do "everything in my power" to see that Congress follows up in the next few days with a five-year plan to cut the deficit by $500 billion.Federal workers breathed a collective sigh of relief that there would be no forced furloughs. The government, closed over the holiday weekend due to the budget impasse, had faced the prospect of a shutdown of non-essential services Tuesday without an agreement.

The president met with reporters as lawmakers, exhausted after a string of late-night sessions, were returning to the work of deciding precisely which spending programs to cut and whose taxes to raise.

Under Monday's late-night agreement between the White House and Congress, that work must be completed by Oct. 19 - or the government faces the risk of yet another shutdown in services.

The budget crisis erupted last week when the House rejected a bipartisan plant that called for $134 billion in tax increases and a wide array of military and program spending cuts. Increases in Medicare fees were rolled back slightly and an alternative plan has been approved, although it contains fewer specifics thant the one that was rejected.

Democrats have complained the budget plans have been unfairly weighted against athe middle income taxpayers to the benfit of wealthier Americans, and Bush's remarks indicated that the final tax package is still in negotiation. One subject: the "bubble" by which some taxpayers pay a 33 percent rate rather that athe 28 percent rate applied to the wealthiest taxpayers.

Asked about athe possibility of raising tax rates on the wealthy, Bushe said: "That's on the table. That's been talked about. An if it's proper, if it can be worked in proper balance between athe capital gains rate and income tax changes, fine."

It was the first time Bush has stated explicitly he could go along with a hike in income tax rates. His opposition to changing the rate structure had been the last remnant of another campaign pledge: "no new taxes"

"The action is in the Congress, but we'll work with them" on filing in the gaping blanks in the deficit-cutting agreement, Bush said "I will do everything in my power to encourage Congress as it struggles to bring forth the most comprehensive and significant deficit cutting plan ever."

The president took pains to defend his top aides for their help in the budget confrontation with Congress. White House Chief of Staff John Sununu and Budget Director Richard Darman have come in for criticism from Republicans and Democrats, who accuse them of high-handed tactics.

"When passions get high, there's bound to be a little broken china," Bush said. "They did an outstanding job," he said of his negotiators, dismissing critical comments from "squeaky wheels" on Capitol Hill.

Bush signed the emergency spending legislation shortly after 7 a.m.

The House gave final congressional approval to the emergency funding legislation on a 362-vote at 1:45 a.m. The Senate passed it on a voice vote. The long-term deficit reduction plan was passed Monday 250-164 by the House and ratified by the Senate early Tuesday morning on 66-33 vote.

Senate Budget Committee Chairman Jim SAsser, D-Tenn., said Tuesday "our task now is to enforce the budget resolution that was passed."

"It's going to be tough, and it's going to be hard to vote for," said Senate Minority Leader Bob Dole, R-kan.

"Next week will be very intense," said House Majority Leader Richard Gephard, D-Mo.

By his comments on taxes, Bush signaled a willingness to compromise on one of the most fiercely fought issues in the budget confrontation.

The president has been seeking a cut in the capital gains tax since before his election in 1988. Democrats in Congress blocked his effort last year and have said that any cut must be accompanied by an increase in tax rates on the wealthy.

Capital gains come from money made from the sale of stocks, real estate and other assets, because the rich would benefit the most.

Democrats meantime, targeted for elimination a quirk in the federal tax system where the marginal tx rate goes as hight as 33 percent for upper-middle-income but then drops back to 28 percent at higher incomes. The pattern has become known as the "bubble."