New Math on Hill, Scramble on K Street

The House's pledge of fiscal restraint could threaten tax breaks across many industries. Businesses and the lobbyists who represent them are on high alert.

Lobbyists are scrambling all over Capitol Hill to prevent any of their clients from becoming a "pay-for."

The Democrats' new pay-as-you-go budget regimen means that lawmakers who want to spend more on one program have to either cut another or raise taxes to pay for it. Similarly, if they want to cut taxes, they must fund the cut by trimming programs or raising other taxes to make up the difference.

Those budgetary offsets are called pay-fors -- a new Washington buzzword striking fear in the hearts of special interests.

Some big pay-fors may be needed. The Democrats' top tax goal in the House is a repeal of the alternative minimum tax, which threatens to increase taxes on many middle-income families. The price tag: about $1 trillion over 10 years. Lobbying groups are fretting about which of their benefits might be eliminated first to pay the bill.

In the Senate, Budget Committee Chairman Kent Conrad (D-N.D.) is writing a budget plan that permits the extension of President Bush's tax cuts past their 2010 expiration date -- so long as they are paid for, Conrad said in an interview yesterday. That would cost more than $400 billion over five years.

Almost every corporation and trade association is on high alert. Interests as varied as health insurers and automakers are working overtime to prevent attacks on their favorite subsidies.

"Everybody's worried about being an offset, a pay-for," said Joel Jankowsky, head of lobbying at the law firm Akin Gump Strauss Hauer & Feld. "Congress is going to be looking at everything, which means that everything is at risk."

Businesses are feeling particularly vulnerable. "It's always so-called corporate loopholes they want to close," said John J. Castellani, president of the Business Roundtable, a group of big-company chief executives.

Take the rapid write-offs that sport-utility vehicles get. Current law gives these heavy autos special tax breaks, but Rep. Earl Blumenauer (D-Ore.), a member of the House Ways and Means Committee, said he intends to offer legislation that would shave those benefits for luxury cars used by businesses. The revenue that would create: $2.2 billion over four years.

"What in God's name is the rationale for including luxury cars that are heavy and consume lots of gasoline?" Blumenauer asked. "It's working against so many of our priorities and policy values."

But auto companies do not want to become pay-fors, no matter the argument. Loss of the tax break would further reduce sales of the vehicles, they say, so lobbyists for foreign and domestic automakers have been making the case to staffs of congressional tax writers for a reprieve.

Democrats adopted the new budget discipline as soon as they took charge of Congress this year. They said they were responding to voter anger over unrestrained federal spending.