Close, But No Budget Deal

Following a day of optimism, the ever-elusive budget deal evaded negotiators into Wednesday night as budgeteers remained haunted by the twin problems of domestic spending and tax cuts.

"We still have a lot of work to do," House Budget ranking member John Spratt of South Carolina told reporters Wednesday evening, following a negotiating session between congressional budget- writers and White House officials.

One Democratic aide said that about $65 billion separated the two sides. The negotiators started the day saying that a budget deal might be cut on Wednesday.

However, the day ended with Republicans still saying the administration wants too much discretionary spending and Democrats questioning whether a Republican tax cut would explode during the second five years, resulting in a $100 billion tax cut becoming a $250 billion tax cut.

Staffers from both sides were expected to work late into the night in an effort to reach agreement.

"The administration is still asking for too much," Senate Majority Leader Lott told reporters Wednesday night, although he conceded that "they have come down some."

But Democrats had other problems. "It's very important that anything we do is sustainable," Gene Sperling, director of the administration's National Economic Council said, adding that while a tax cut can be part of a balanced budget agreement, "it needs to be a sustainable [one], not exploding. No one wants to relive the 1980s."

However, Republicans said the Democrats were still insisting on a tax cut that was too small for Republicans, with Lott saying that one problem is the education tax programs the president wants.

"How do you get what the president wants in education when there is not a lot of support for it?" Lott asked, saying the tax cut must be higher if the administration insists on its education programs.

Lott said the negotiators also are searching for a way to provide the tax-writing committees with clear guidance of the tax cuts needed "without tying the hands" of the committees.

House Ways and Means Chairman Archer said Wednesday that the two sides had significantly narrowed their differences on tax issues.

Lott said the negotiators are close to an agreement on entitlement reforms, although he said Republicans are urging the administration to transfer some of its new entitlement spending into discretionary programs.

Lott continued to insist that changes to the Consumer Price Index will not be done legislatively, but said that it is likely that the Bureau of Labor Statistics will provide negotiators with some guidance of how much of an adjustment is needed-a move that would allow Congress to build in savings.

And the majority leader said a budget deal is likely to use more optimistic economic assumptions in some areas, particularly income shares, than the CBO estimates called for. Lott said he wants to ensure that accurate assumptions are used.

The budget deal could also have an impact on plans for an automatic continuing resolution.

Democrats had said that the Senate GOP insistence on including the automatic continuing resolution in the supplemental spending bill could hurt a budget deal. Lott said Wednesday night that if a budget deal is reached, it would lock in discretionary spending levels.

"There's less of a need for it if you get an agreement," Lott said.

Meanwhile, Archer told reporters Wednesday that "we're pretty close on the tax side" of the budget deal and said "it would be nice if we get a net [tax cut] of $100 billion" in a possible agreement.

Archer said Republicans will have "done very well" if the tax component of any budget agreement includes a broad-based capital gains tax cut, lower estate and gift taxes and "something" on the alternative minimum tax for individuals. But Archer said that beyond extending the airline ticket tax, "I'm not at all certain of the amount we can raise in additional revenues that would get a majority vote on the committee."

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