GOP Leaders Agree to $41.6 Billion Spending Cut

The $453 billion defense bill includes $50 billion for fighting in Iraq and Afghanistan, as well as a provision to bar the torture of military prisoners that was written by Sen. John McCain (R-Ariz.) and agreed to reluctantly by President Bush. It also includes a carefully crafted compromise that would rein in detainee access to federal courts.

The legislation includes numerous other high-priority measures, including $3.8 billion to fund flu pandemic prevention and $2 billion for low-income heating assistance. The package also includes a 1 percent across-the-board cut in discretionary spending, with an exception for veterans benefits.

Rep. David R. Obey (Wis.), the senior Democrat on the House Appropriations Committee, accused Stevens of luring support for drilling from Gulf Coast lawmakers by including "an offer they can't refuse" on hurricane relief funding. The package would provide $29 billion for Mississippi and Louisiana, and create a Gulf Coast Recovery Fund, with some proceeds coming from an auction of unused spectrum for digital television signals.

The U.S. Army Corps of Engineers would also receive nearly $3 billion in levee restoration funding to accelerate completion of New Orleans levee projects, repair hurricane damage and increase protection from Category 5 storms.

The final budget deal envisions more than $10 billion in savings over 10 years by allowing states to raise co-payments and deductibles for many recipients of Medicaid, the state and federal health program for the poor. An additional $6.1 billion in savings would come from health-benefit reductions, according to Congressional Budget Office documents.

Negotiators bowed to White House pressure and dropped a Senate-passed provision that would have saved billions of dollars by eliminating a fund set up to lure private insurance companies into the Medicare prescription drug program. But another private-insurance subsidy was dropped to save $6.5 billion.

The final deal would shave $1.5 billion over five years from child support enforcement aid to local governments, down from the House-passed $5 billion level.

Stringent new work requirements for welfare recipients could shift considerable costs onto state governments. The CBO estimates that state governments may have to spend $8.4 billion over the next five years to finance welfare-to-work programs to meet the new requirements.

And in one of the most controversial provisions, the agreement would shave $12.7 billion out of the federal student loan program, in large part by locking in interest rates often at a higher level than the current variable rates.

"This bill is the largest raid on student aid in history. At a time when millions of American families are struggling to keep up with skyrocketing tuition costs, it is shameful for Congress to raid student aid in order to pay for tax breaks for the wealthiest Americans," said Rep. George Miller (Calif.), the senior Democrat on the House education committee.