Democrats said their budget would balance in five years by imposing tough rules preventing new tax cuts or expansions of entitlement programs unless they are offset.
"In the past several years under Republican leadership, the budgets have been bloated and stale in their thinking. Today we have a budget that is lean and fresh in its thinking," said House Speaker Nancy Pelosi, D-Calif.
On a 214-209 vote with 13 Democrats defecting, the House approved the budget and used procedural rules to also approve an $850 billion increase in the statutory debt ceiling without a separate vote. That is one more than voted against the initial version, with Rep. Gene Taylor of Mississippi joining the original 12.
Republicans slammed the Democrats for "hiding" the debt-limit increase, although the GOP routinely used the same procedure when they were in control.
But voting to raise the debt limit to $9.8 trillion clearly caused concern among members of the moderate-to-conservative Blue Dog Coalition, and especially freshmen who campaigned to erase the run-up of debt over the past six years.
"We could have gone either way," conceded House Budget Chairman John Spratt, D-S.C., who has in the past proposed doing away with the "Gephardt rule" enabling the automatic debt limit hike.
But Spratt said Republicans should support not having to cast a separate vote. "It really works out to the advantage of the Republicans, because we are basically having to raise the debt ceiling to accommodate debt increases under their watch," he said.
The Senate, which does not enjoy such procedural protections and will have to take that politically risky debt-limit vote later this year, approved the budget by a 52-40 margin. Maine Republican Sens. Olympia Snowe and Susan Collins crossed the aisle to support it.
There is no attempt in this budget to rein in the fast-growing entitlement programs Medicare and Medicaid, which Democrats argue should be done in the context of comprehensive budget talks with the White House at the table and both sides willing to sacrifice. But Republicans said it would pass the burden of rapidly rising healthcare costs to the next generation.
"Regrettably, this budget does nothing -- zero, to address this looming crisis. And it's an act that I think fails our obligations as a generation," said Senate Budget ranking member Judd Gregg, R-N.H.
There is an allowance for $180 billion in "middle-class" tax cuts, but they could only get through the House if the chamber first waives the pay/go rule and then projected surpluses actually materialize.
The budget plan also sets aside 23 separate "reserve funds" totaling roughly $190 billion in new initiatives ranging from veterans' health to child care to Navajo water rights.
Republicans said the combined effect would be to spend down the surplus, which would prevent the "trigger" mechanism from allowing tax cuts.
"The 23 reserve funds represent a $190 billion spending wish list which puts a target on these limited tax cuts they want to extend, and if they get their wish list, taxpayers aren't going to get their tax cuts, and the trigger won't trigger, and they'll get another $200 billion tax increase windfall they can spend to cover this $190 billion wish list they want," said House Budget ranking member Paul Ryan, R-Wis.
The most immediate impact of the budget will be felt in the appropriations process, which began Friday in the House as the Homeland Security Appropriations Subcommittee took up its fiscal 2008 bill. That bill will provide roughly $2 billion over Bush's request.
That will be the first of 12 spending bills, and the process will only get more difficult as more controversial bills like the Labor-Health and Human Services measure begin to move.
The White House opposes the overall $21 billion increase in domestic spending the Democrats' budget allots, and is threatening to veto bills if they exceed President Bush's $933 billion request.
Unless the two sides reach an accommodation early in the process it could lead to an end-of-session budget battle reminiscent of the Clinton-era fights with the GOP-controlled Congress.
After years chafing in the minority, however, Democrats said they are not about to blink. "The American people expect and deserve a government that is responsive to their needs and that also lives within its means. That is exactly what we intend to deliver," Senate Appropriations Chairman Robert Byrd, D-W.Va., said in a statement.