Senate Slices Reconciliation Figure to $350 Billion

Weeks of Republican budget solidarity began to unravel March 25 as Senate

centrists capped the reconciliation growth package at $350 billion and siphoned another $137 billion away from President Bush’s $630 billion tax cut permanency allocation.

Senate Budget Committee Chair Don Nickles, R-Okla., announced late March 25 that members still had to work through a handful of Democratic amendments (eight remain) and some Republican changes but noted that lawmakers were on target to complete action on the budget by the close of business on March 26. Congressional leaders could then spend the balance of the week ironing out a $75 billion war supplemental President Bush has requested to cover the Iraq


GOP lawmakers spent most of the morning closing ranks around the remaining $1.25 trillion tax figure — Senate budget writer Russell D. Feingold, D-Wis., managed to slice off $100 billion for a new war reserve last week — in the 2004 budget blueprint, but seemed to lose control of the fiscal reins once lawmakers approved 51 to 48 an amendment from Senate centrists setting the reconciliation tax ceiling at $350 billion and carving out a new $396 billion Social Security

reserve fund. Several other amendments chipped away at the growth plan figure

and the money Republicans planned to use to eliminate the 2010 sunset of the

Economic Growth and Tax Reconciliation Relief Act of 2001 (EGTRRA).

At press time, Senate Democrats were estimating that their assault on the spending blueprint written by Nickles had cut the total 11-year tax figure from $1.3 trillion to around $850 billion.

The stunning tax reversal could upend Bush’s chances of seeing his full

growth package through to completion. House Ways and Means Committee Chair

William M. Thomas, R-Calif., was set to begin drafting this week a growth

package largely tracking the $726 billion reconciliation figure included in the House budget outline.

Earlier in the day, House Majority Leader Tom DeLay, R-Texas, stressed to

reporters that the House did not view any Senate attempts to pare down the

president’s policies as the final word on tax cuts. “Whatever figure the Senate has is not a compromise figure,” he asserted. “We’re going to defend the

president’s principles when we get to conference.”

Senate Majority Leader Bill Frist, R-Tenn., said he expects a bicameral

budget conference could begin by April 1. A House GOP budget aide said the

conference will get under way as early as March 27, but predicted the panelists might not begin working in earnest until the week of March 31.

Second Time’s the Charm

After watching their plan to trim the tax bill and devote the savings to

deficit reduction fail 62 to 38 last week, Senate centrists John B. Breaux,

D-La., Olympia J. Snowe, R-Maine, Max Baucus, D-Mont., and George V. Voinovich, R-Ohio, convinced several swing voters to join them in opposing President Bush’s $726 billion growth prescription. Tax cut opponents Lincoln D. Chafee, R-R.I., and Ernest F. Hollings, D-S.C., joined every Democrat — except for absentee Bush ally Zell Miller, D-Ga., who was out of town — in fine-tuning the tax cut figure.

Breaux said this latest iteration allows for a $350 billion growth package and sets aside $396 billion from the overall Republican tax allocation for Social Security modernization — although if no reforms are made the money can then be used to pay down the debt. He added that the amendment should send a clear message to both House Republican leaders and the White House that most Senators will not accept a reconciliation tax bill above $350 billion.

“We’ve reached a positive middle ground,” Baucus said after the vote,

adding that the centrist backstop would still provide taxwriters adequate room

to dole out relief to states, encourage business expansion, and reduce the

national debt.

Snowe suggested that the toned down tax figure would ensure her support for a final budget resolution and a reconciliation tax bill below the $350 billion benchmark. “This is an important vote that positions the Senate to support a

smaller-size — and a right-sized — growth package,” she said in a release.

“Now we need to turn our attention to passing a budget resolution so the Finance Committee can begin to craft an effective growth package.”

Conrad warned House leaders that any attempts to inflate the reconciliation bill back to the original $726 billion would face the sustained opposition of the bipartisan centrist group. “The agreement of the bipartisan moderates is that that reduction in the tax cut holds throughout the process. So I think if they [GOP leaders] want to have their tax cut package go through, they’re going to have to respect this vote in the Senate,” he said.

Meanwhile, Democratic leaders in both chambers hailed the growth plan

reduction as a bipartisan blow for fiscal discipline. “We made a very

irresponsible budget a little more responsible by cutting the tax cut. This is not nearly as good a tax situation as many of us would like, but I do believe that it does make this budget slightly more responsible,” Senate Minority Leader Tom Daschle, D-S.D., told reporters.

Across the Capitol, House Minority Whip Steny H. Hoyer, D-Md., urged House

GOP leaders to reconsider their own tax objectives in lieu of the obvious “death knell” against the Bush growth package “Now that it’s clear that the president’s bloated tax package lacks support even among Republicans and that our country will spend tens of billions of dollars on the war in Iraq, it is time for the Republican party to focus on a realistic budget plan for this country,” he challenged.

Tax cut supporters from Citizen’s for a Sound Economy, however, voiced

“extreme disappointment” with the Senate vote and implored Republican leaders to counteract the tax relief cut. “The economy is too shaky and the tax burden too high for our tax relief to be yanked away,” CSE President Paul Beckner said in a release. “I urge the leadership in the Senate to do everything possible to

reverse this harmful action.”

Bit by Bit

Beyond the centrist amendment, members on both sides of the aisle managed to slant the tax and spending course to their favor. Other amendments that passed March 25 include:

a Feingold amendment restoring for five years the expired pay-as-you-go rules and raising a 60-vote point of order against any unpaid-for mandatory spending increases or tax cuts in the Nickles resolution (approved by voice vote);

an amendment by Senate Minority Whip Harry Reid, D-Nev., redirecting $12.8

billion from the reconciliation tax cut to increase funding for veterans retirement and disability pay (approved by voice vote);

an amendment from Sen. Edward M. Kennedy, D-Mass., adding $38 billion from the EGTRRA permanency pool to the $50 billion reserve fund — creating an $88 billion reserve — to provide health care coverage to the uninsured (approved by voice vote);

an amendment by Sen. Maria Cantwell, D-Wash., redirecting $678 million from the EGTRRA permanency fund to spending for the Workforce Investment Act (approved 51 to 48); and,

an amendment by Sen. Arlen Specter, R-Pa., shifting $2.8 billion in the overall spending figure to various national health groups (approved 96 to 1).

Lawmakers also approved a number of nonbinding Sense of the Senate

amendments, including:

an amendment by Sen. Carl Levin, D-Mich., calling for Congress to curtail corporate expatriation by closing the so-called Bermuda loophole and splitting the $4.7 billion in tax savings equally between deficit reduction and school modernization (approved by voice vote);

an amendment by Sen. Patty Murray, D-Wash., to increase education spending by $8.9 billion drawn from the EGTRRA permanency fund (approved by voice vote);

and, two amendments by Sen. Mike DeWine, R-Ohio, endorsing spending increases for children’s medical education costs and for crime identification technology.