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GOP Lawmakers Present Tax-Cutting Budgets

Blueprints Include Spending Reductions, Slower Growth for Entitlement Programs

By Jonathan Weisman
Washington Post Staff Writer
Thursday, March 10, 2005; Page A04

House and Senate Republicans yesterday unveiled budget plans for the coming fiscal year that order up billions of dollars in spending cuts for veterans, agriculture, education and health care programs, while making room for as much as $106 billion in tax reductions over the next five years.

For the first time since the balanced-budget fight of 1997, GOP leaders hope to use the budget process to slow the growth of an array of politically sensitive entitlement programs, from student loans and veterans health care to Medicaid and agriculture subsidies. The House plan is seeking $69 billion in entitlement savings over five years, more than twice the $26 billion in savings written into President Bush's budget. The Senate plan would save $32 billion.

Non-defense programs that are subject to annual spending plans would also be hit, some of them hard. The House budget blueprint would cut discretionary spending for international affairs, the environment, agriculture, housing, transportation, education and training, health and justice. Funding for community and regional development programs would be slashed from $22.7 billion this year to $13.7 billion in the fiscal year that begins in October.

The House plan would shrink the federal budget deficit from the $412 billion recorded last year to $203 billion in 2010, even as it continues to cut taxes, said House Budget Committee Chairman Jim Nussle (R-Iowa). The Senate plan would reduce the deficit to $208 billion in five years.

"People will feel some real pain," said Sen. Pete V. Domenici (R-N.M.), "but I don't know how you get a deficit down without people taking some medicine."

Democrats, however, said those deficit figures significantly understate the government's red ink because they do not reflect the long-term costs of the wars in Iraq and Afghanistan, of Bush's Social Security proposal, or of fixing the alternative minimum tax -- a parallel income tax set up to plug tax loopholes for the rich but increasingly ensnaring the middle class.

What deficit reduction there is would be extracted from the nation's poorest, most vulnerable citizens, Democrats charged, as Republicans try to extend tax cuts mainly for the affluent, such as the 2003 reductions in capital gains and dividend rates, which will expire in 2008. "This budget asks the most from those who have the least, and the least from those who have the most," said Rep. Chet Edwards (D-Tex.).

Taxes are sure to be a major flash point, especially amid concerns over the deficit. The House budget assumes tax cuts totaling $106 billion over the next five years, enough to extend the capital gains and dividend cuts, as well as the other tax cuts that are set to expire, such as a college tuition deduction, a break for small-business investment, and the business tax credit for research and development. The House total would offer conservatives room for other tax moves under consideration, such as an immediate repeal of the estate tax or an extension of a tax break that allows residents from states without income taxes to deduct sales tax payments from their federal taxes.

The Senate approach is more modest, setting aside no more than $70.2 billion -- about $30 billion less than Bush seeks -- to extend popular tax cuts that are set to expire. But even that sum may be politically problematic. The Senate budget uses parliamentary language to ensure that its tax cuts could pass with a simple 51-vote majority rather than the 60 votes needed to break a filibuster. A small but pivotal group of moderate Republicans in the Senate has signaled it may balk at any tax cuts that are not paid for by spending cuts or revenue increases.

The stakes for securing passage of a budget are high. Congressional budget plans set bottom-line limits for spending and tax cuts, which the appropriations and tax-writing committees must adhere to as they craft legislation for the coming fiscal year.

To ease the way for cuts in entitlement spending, a budget plan would also include the same parliamentary test the Senate wants to use for tax cuts. Without a budget, any entitlement changes would probably need 60 votes to overcome a filibuster, a hurdle that could make Bush's policy prescriptions unattainable.

The House budget orders the Agriculture Committee to draft legislation by September trimming farm programs by $5.3 billion over five years. The Education and Workforce Committee would have to cut the entitlement programs under its jurisdiction -- mainly student loan and pension programs -- by $21.4 billion. The Energy and Commerce Committee would have to serve up $20 billion in savings, largely from Medicaid, environmental cleanups and federal power authorities. The Ways and Means Committee, which has jurisdiction over Medicare, the earned-income tax credit, welfare, child care and unemployment insurance, would have to produce a bill saving $18.7 billion through 2010. Even the Veterans' Affairs Committee would have to do its part, with $798 million in cuts.

In the Senate, the bulk of entitlement cuts -- $15 billion worth -- would fall to the Finance Committee, which has jurisdiction over Medicare and Medicaid. The Health, Education, Labor and Pensions Committee would have to find $8.6 billion in cuts.

Nussle said all those cuts together would only slow the growth of entitlement spending from 5.6 percent next year to 5.5 percent. "We're not starving programs," he said. "They're continuing to grow at huge rates."

Democrats are demanding that the sacrifice should come in the form of tax increases as well as spending cuts. "If you have a dam with two holes and you plug up only one and leave the other one wide open, that doesn't get the job done," said Sen. Russell Feingold (D-Wis.).

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