Senate appropriations chief predicts budget stalemate

Peter Cohn and Martin Vaughn — Wed, 03 Mar 2004 00:00:00 -0500

"I think, in all probability, we're probably not going to get a budget," Stevens said. "We can't spend over the [fiscal 2004 level], and the only way to live with [fiscal 2004 levels] is to have a continuing resolution. ... It will be very difficult to get it out of the Senate. The tension is money. There's not enough money."

Senate Budget Committee Chairman Don Nickles, R-Okla., and his committee Wednesday were scheduled to begin marking up a fiscal 2005 budget resolution expected to limit discretionary spending to $814 billion as capped by last year's budget resolution. That is $9 billion lower than President Bush's $823 billion request, as estimated by the Congressional Budget Office.

Aides said Nickles plans to reduce defense spending by $7 billion and non-defense by $2 billion, exempting homeland security and leaving non-defense and non-homeland security discretionary spending frozen at last year's levels.

Some Republican senators are advocating increases for domestic programs such as highways, special education and veterans' health care. It will take 60 votes to overcome points of order to increase spending above the budget resolution's limits, unless it is defense spending classified as "emergency," which then would take only 51 votes.

Nickles plans to include a provision making room for $30 billion for Iraq operations. The House version includes $50 billion for war expenses.

"It looks like a tough budget to work with, and we're just going to have to figure out how to do it. He [Nickles] said my subcommittee ... would be very tough, no doubt about it, it will be tough. We've faced tough budget resolutions before, and we've always muddled through," said Senate Labor-HHS Appropriations Subcommittee Chairman Arlen Specter, R-Pa.

The Senate will leave itself the option of using reconciliation protection to extend expiring tax cuts at an $80 billion, five-year cost, Senate sources said. That would allow GOP leaders to shield from filibuster a five-year extension of three tax cuts that expire at the end of this year, should they choose to do so. Nickles said he might also include reconciliation instructions regarding the estate tax and a debt limit increase.

The $80 billion corresponds to the revenue lost by extending certain provisions -- those that increased the child tax credit, increased the standard deduction for married couples and expanded the 10 percent income tax bracket. An additional $13 billion would be incurred in outlays, a Senate aide said, adding up to the $93 billion cost over five years estimated by the Joint Committee on Taxation.

The proposed fiscal 2005 budget resolution also will assume that an increase in the deduction for the alternative minimum tax, which also expires at the end of this year, will be extended. It also assumes the extension of other tax cuts expiring by fiscal 2009, including the tax rate reduction to 15 percent for dividends, capital gains and increased small business expensing. All that adds up to a baseline assumption of $144 billion in revenue loss as a result of tax cuts, Senate aides said.

Other items on the Senate's tax agenda -- such as proposals to repeal the foreign sales corporation/extra-territorial income exclusion and extend the research and development tax credit -- are not included in that figure because it is assumed they will be paired with offsets to make them revenue-neutral, according to one tax aide.

Senate Finance Committee Chairman Grassley said Tuesday that reconciliation protection was a "shotgun behind the door" to be used only as a last resort. But other Republicans questioned whether moving the three expiring tax cuts outside of reconciliation, with offsets, would succeed as a strategy.

"I don't think that is likely to be the best approach," said Sen. Trent Lott, R-Miss. He noted that reconciliation might be needed to ward off non-germane amendments. "I think it would pass, but how do you get it to the floor without all sorts of mischievous and meritorious amendments being offered?" said Lott.

Sen. Olympia Snowe, R-Maine, said she had not yet decided whether she would support a total of $93 billion in tax cuts if they were not offset. She said she was consulting with colleagues on both sides of the aisle.

Susan Davis contributed to this report.

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House budget chair seeks to freeze domestic spending

Peter Cohn and Martin Vaughn — Tue, 02 Mar 2004 00:00:00 -0500

He said spending for defense and homeland security would be trimmed 0.5 percent from President Bush's request. He also said he would propose to GOP leaders a one-year moratorium on earmarks in appropriations bills and would like to freeze funding for unauthorized programs.

Under Nussle's plan, there would be no new mandatory or entitlement expenditures for a year. His plan would make room for a supplemental -- not to exceed $50 billion -- for operations in Iraq. He said his plan would produce a budget deficit under $500 billion, compared to the estimated fiscal 2004 deficit of $524 billion.

Meanwhile, Senate Finance Chairman Grassley said he would not oppose including reconciliation instructions in a Senate budget resolution being worked out by GOP leaders, but preferred not to use reconciliation protection to pass tax cuts this year.

"I don't mind reconciliation being a possibility, but I would rather have it as a shotgun behind the door," he said. Grassley said he did not want to use reconciliation, which would protect tax cuts from a filibuster, because it "hurts the bipartisan opportunity to get a tax bill passed." He added that it was less imperative to use the reconciliation option this year than in previous years because of the improving economy.

"The absolute essentiality of passing tax legislation is less so now," he said. Grassley said he believes that legislation to extend the three tax cuts that expire at the end of this year -- an increased child tax credit, expanded 10 percent bracket and increased standard deduction for married couples -- can pass the Senate with bipartisan support. The Joint Tax Committee scored the cost of extending those items through fiscal 2009 at $93 billion. Nussle also backed that proposal.

Senate Budget Committee Republicans met Tiesday to work out details of the chamber's budget resolution, which Budget Committee Chairman Don Nickles, R-Okla., plans to consider in committee Wednesday and Thursday. Grassley, who attended the meeting, said he and Nickles had agreed to include a tax reconciliation package to provide future legislation extending some tax breaks with procedural protections. But senators emerging from the meeting said the panel was still hung up over spending levels, particularly for defense and transportation programs.

With an $814 billion spending cap set by last year's budget resolution, senators are looking to cut $9 billion from the president's request of $823 billion in fiscal 2005 as estimated by the Congressional Budget Office.

Sen. Conrad Burns, R-Mont., said defense spending was "looking at a big increase" under President Bush's plan, but that a number of senators, Nickles included, were uncomfortable with reductions in Bush's defense budget. The other big ticket item is highway funding, Burns said, with some panel Republicans wanting to increase spending above the president's request.

Nickles predicted that before Wednesday's scheduled 2:15 p.m. markup there would be agreement on outstanding items. "We will have a budget, and I think it will be supported by a majority," he said.

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Government Executive - Authors - Martin Vaughn

Senate appropriations chief predicts budget stalemate

House budget chair seeks to freeze domestic spending