GOP Leaders Agree to $41.6 Billion Spending Cut
Deal Includes Defense Bill With Arctic Drilling; Reductions in Medicaid, Student Programs Also Planned

By Jonathan Weisman and Shailagh Murray
Washington Post Staff Writers
Monday, December 19, 2005

House and Senate GOP leaders agreed yesterday to a five-year budget plan for cutting spending for Medicaid and other entitlement programs by $41.6 billion and a separate measure to open the Alaskan wilderness to oil drilling.

The authority to open the Arctic National Wildlife Refuge to oil exploration -- long sought by President Bush, energy companies and Republican leaders -- will be attached to a separate fiscal 2006 defense spending bill that has widespread support in both parties because of its funding for fighting in Iraq and Afghanistan.

Rushing to get out of town for the holidays, the House moved toward early-morning votes on both bills. The pre-dawn showdown would hide the House votes from public view, a maneuver that leaders have used all year on difficult votes.

A defense policy bill was also cleared for consideration, after Republican leaders decided to strip out a controversial, unrelated campaign finance measure that had garnered bipartisan Senate condemnation. The Senate could act today on the budget bill and as early as Wednesday on defense spending.

Republican leaders hailed the agreements as proof that they were finally getting a handle on the federal budget after a five-year binge of new spending and tax cuts that turned record budget surpluses into a stream of massive deficits. The budget accord would cut less than one-half of 1 percent from a projected $14.3 trillion in federal spending over the next five years. Depending on the outcome of negotiations over as much as $60 billion in tax cuts, the savings in spending could vanish.

Congress, however, has not tried to slow the growth of entitlement programs such as Medicare, Medicaid and student loans for more than a decade. Extracting those cuts has been a politically painful process that has divided Republicans and kept Congress in session months after its once-scheduled Sept. 30 adjournment debate.

"House Republicans promised the American people that we would restrain federal spending and reform government programs," said House Speaker J. Dennis Hastert (R-Ill.). "This bill is a good first step."

"The Republican revolution is back," said Rep. Mike Pence (R-Ind.), who rallied House conservatives to push the cuts.

Democrats were furious about the drilling maneuver on the defense bill, engineered by veteran Sen. Ted Stevens (R-Alaska), who for years has sought federal approval for tapping oil reserves in the Arctic National Wildlife Refuge. Blocking Arctic drilling is a priority for environmental groups, and Democrats said they would attempt to strike it using procedural tactics.

Democrats and liberal economic analysts also said the budget deal, although less dramatic than an earlier, House-passed version, would still allow states to impose significant new costs on health care for the poor, cut child support enforcement and foster care aid, and impose new work requirements on welfare recipients.

Stevens's gambit on oil drilling is that Democratic and moderate Republican opponents of the measure will be unwilling to hold up legislation that funds U.S. troops. As he emerged late yesterday from a final negotiating session, Stevens said he could not predict the outcome.

Senate Minority Leader Harry M. Reid (D-Nev.) protested the "absolute cynicism" of daring senators to vote against a defense bill, accusing Republicans of violating a Senate rule that bars unrelated provisions from being added during final negotiations on legislation. Senate Majority Leader Bill Frist (R-Tenn.) accused Reid of "false bravado" and said he was "frustrated by being in the minority."

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.