With unusual speed, President Barack Obama’s allies in Congress are pushing through a compromise budget plan endorsing much of his ambitious agenda but falling short of his hopes for tax cuts and curbs on global warming.
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The House began debate on the $3.4 trillion spending plan Tuesday afternoon and both House and Senate were to vote Wednesday. With the economy in recession and the bailout of the financial sector costing hundreds of billions of dollars, deficits would rocket to $1.7 trillion for the ongoing budget year, dipping to a still-astonishing $1.2 trillion in 2010.
Despite dispiriting deficits that never dip below $500 billion, Democrats are pressing full-speed ahead with plans for an expensive overhaul of the U.S. health care system and a 9 percent increase in 2010 for non-defense programs funded by Congress each year.
The budget measure is a nonbinding outline for follow-up tax and spending legislation. It is Congress’ response to Obama’s $3.6 trillion budget plan released in February.
Perhaps most significantly, the budget plan would give Democrats a stronger hand in advancing Obama’s health care initiative this fall by allowing it to go forward without threat of GOP stalling tactics in the Senate. Democrats pledge to first try passing health care legislation with GOP support.
“We invest in health care reform, not just to improve health care quality and improve coverage, but to reduce the crushing burden of health care costs on American businesses,” said Rep. Jim McGovern, D-Mass. “Everybody likes to talk about health care reform; this budget actually gets it done.”
But the budget plan skirts difficult decisions on how to pay for Obama’s health care plan, which is expected to cost more than $1 trillion over the next decade. It allows the new president’s signature $400 tax credit for most workers to expire in 20 months. And votes in the Senate made it clear that Obama’s initiative to combat global warming by making it more expensive to emit greenhouse gases faces great obstacles.
Democrats say they and Obama inherited a record budget mess and deserve credit for cutting the deficit by two-thirds over the next five years. Most of those deficit savings, however, occur normally as the economy recovers and tax revenues rebound and because of reduced war costs.
Republicans say that Democrats rely on the usual bag of budget tricks: savings that won’t appear, spending caps that won’t hold, and tax cuts that aren’t “paid for” as promised.
The Democratic plan assumes Congress will devote only $50 billion a year for operations in Iraq and Afghanistan for 2011 and beyond and pass an annual fix for the alternative minimum tax without adding to the deficit over 2013-14.
“It is just so disingenuous it’s almost unbelievable,” said Sen. Judd Gregg, R-N.H. “The $500 billion number is a total fraud.”
The Democratic plan embraces several of Obama’s key goals besides a health care overhaul, including funds for domestic programs and clean energy, and a tax increase for individuals making more than $200,000 a year or couples making more than $250,000.
It also devotes $512 billion over five years to extend tax cuts passed during President George W. Bush’s first term for middle-class workers, investors and families with children.
Democrats have set an Oct. 15 deadline for congressional panels to approve a fast-track health measure if party leaders decide to take that route. The same deadline would apply to Obama’s initiative to eliminate student loan subsidies for banks and other lenders.
Meanwhile, House Democratic leaders put new pressure on the Senate to pass a pay-as-you-go law that would require taxes and new spending on benefit programs to be offset with tax increases or spending cuts elsewhere in the budget so as not to reduce the deficit. If not, across-the-board spending cuts would be imposed across much of the budget.
The idea is a top priority of moderate “Blue Dog” Democrats in the House, who have solid backing from Obama and House Speaker Nancy Pelosi, D-Calif. The existing pay-as-you-go provision is simply a rule that has been waived on key occasions.
In the next two or three years, the budget assumes existing pay-as-you-go rules would be waived for legislation extending tax cuts and forestalling a cut in doctors’ payments under Medicare. But the moderate “Blue Dog” Democrats are demanding tighter discipline after that in the form of the pay-as-you-go law.
