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Panel clears 2008 budget proposal over GOP objections

Resolution would fully fund President Bush's defense request and the war on terrorism, while providing for domestic priorities.

On a straight party-line vote, the Senate Budget Committee approved a fiscal 2008 budget resolution Thursday, after rejecting by similar partisan splits 10 Republican amendments, most of which were attempts to curtail spending or prevent tax increases.

The 12-11 final vote for the Democratic-drafted measure sets the stage for what is expected to be an intense partisan debate in the full Senate next week.

Budget Chairman Kent Conrad, D-N.D., said the resolution would fully fund President Bush's defense request and the ongoing global war on terrorism while providing for domestic priorities, including health care and education, without raising taxes.

"We believe there doesn't need to be a tax increase at all under our budget," Conrad said after the markup.

But Budget ranking member Judd Gregg, R-N.H., said it contained massive spending increases and virtually ensured that most of President Bush's first-term tax cuts would not be extended.

Although documents provided by the majority staff put total outlays authorized at $2.93 trillion, the resolution contained what Gregg said were 25 "reserve funds" to provide additional spending for a wide range of domestic programs, on the condition that the Appropriations Committee and authorizing panels can find spending cuts or revenue increases to cover the added cost.

Democratic amendments approved by the committee, several on unanimous voice votes, added six such accounts to increase funding for health care, veterans' benefits and child care.

It also approved by voice vote amendments offered by Sen. Pete Domenici, R-N.M., to allow for mental health parity legislation pending in the Senate and Sen. Lindsey Graham, R-S.C., to set aside $5 billion in the defense budget to ensure that troops headed to the war zone were adequately equipped and wounded warriors were cared for properly.

Finance ranking member Charles Grassley, R-Iowa., became agitated during the morning question period over the considerable burden the budget resolution would impose on that panel to find offsets.

Grassley said the budget provided just 5 percent of the revenue required for the new proposed spending. "The rest is smoke and mirrors," he said. The likelihood that the Finance Committee will be able to come up with revenue increases of that magnitude "is very remote," he added.

Gregg argued that the pay/go restrictions in the budget, which require every tax cut or spending increase to be offset unless waived by a 60-vote majority, ensures that most of the tax cuts that will expire by 2010 will not be extended. He said that would amount to $900 billion in tax increases in the future.

Conrad disagreed, contending that most of the additional revenues required in the next fiscal year could be obtained by closing the "tax gap" by collecting taxes that now go uncaptured, and by curtailing offshore tax havens and tax shelters.

"Frankly, I don't think it's very difficult to achieve," Conrad told reporters afterward. "Anybody who tells me they can't collect 15 percent of this money that's in tax havens and tax gaps and tax scams, they better get a new revenue commissioner because it ain't that hard. I did it when I was a tax commissioner [in North Dakota]."

But when Gregg offered an amendment to require that any revenues raised from closing the tax gap go to deficit reduction, Conrad led the opposition that rejected it 13-10, with Domenici crossing party lines to join Democrats.

But Conrad conceded the budget was crafted to create pressure for bipartisan efforts to overhaul the tax system and big entitlement programs -- Social Security and Medicare -- that will be stressed by baby boom retirements.

Treasury Secretary Henry Paulson criticized the Senate Democratic budget plan, saying it "assumes a significant tax increase, which is the last thing our economy needs as we work to extend the current expansion."

Chris Strohm and Peter Cohn contributed to this report.

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