Democrats Bow to Bush's Demands in House Spending Bill
Billions Trimmed From New Requests

By Jonathan Weisman
Washington Post Staff Writer
Thursday, December 13, 2007

House Democratic leaders yesterday agreed to meet President Bush's bottom-line spending limit on a sprawling, half-trillion-dollar domestic spending bill, dropping their demands for as much as $22 billion in additional spending but vowing to shift funds from the president's priorities to theirs.

The final legislation, still under negotiation, will be shorn of funding for the war in Iraq when it reaches the House floor, possibly on Friday. But Democratic leadership aides concede that the Senate will probably add those funds. A proposal to strip the bill of spending provisions for lawmakers' home districts was shelved after a bipartisan revolt, but Democrats say the number and size of those earmarks will be scaled back.

When defense spending is added to the total, discretionary spending for fiscal 2008 would reach a tentative total of $936.5 billion, $3.7 billion more than the president's request, said House Appropriations Committee staff members. All of the additional money would be spent on veterans affairs.

The agreement signaled that congressional Democrats are ready to give in to many of the White House's demands as they try to finish the session before they break for Christmas -- a political victory for the president, who has refused to compromise on the spending measures.

The House last night also approved a new version of legislation that would stave off the spread of the alternative minimum tax, a parallel tax system originally targeted at the very rich, to millions of middle-class families. The House version would not add to the federal budget deficit.

The progress yesterday on Capitol Hill did not mean that lawmakers will be rushing to the exits in the next few days. The AMT bill, which was approved 226 to 193, pays for the $50 billion tax fix largely by preventing hedge fund managers from deferring compensation by shifting their pay to offshore tax shelters. The White House issued a fresh veto threat, reiterating Bush's opposition to any tax increases to pay for an AMT fix.

The threat virtually ensured that the Senate will not muster the 60 votes needed to break a threatened Republican filibuster. It moved Congress further toward shattering a Democratic pledge not to pass tax cuts that are not fully offset by tax increases or spending reductions.

Senate Democratic leaders, backed by key Republicans, finalized a new version of a comprehensive energy bill. It would raise automotive fuel-efficiency standards and preserve a package of conservation and renewable-energy tax incentives, to be funded largely by revoking tax breaks given to the largest oil companies in recent years.

The Senate is to vote today on the revised energy bill, and senators from both parties said proponents are close to reaching the 60-vote threshold. Majority Leader Harry M. Reid (D-Nev.) summoned from the campaign trail the five senators seeking the presidential nomination for this morning's vote.

The new version of the bill meets a key White House demand by stripping out a requirement that utilities move toward generating 15 percent of their electricity from renewable energy sources. It also pares back tax increases on oil companies by exempting independent energy companies from a provision that would end a manufacturer's tax credit awarded in 2005.

But the White House is also threatening to veto that legislation. "It seems that Senator Reid wants to keep the tax title in there, which the president has been very clear that he won't sign," White House spokesman Dana Perino said.

Bush may also veto the spending package, even though Democrats shaved $22 billion from federal domestic programs to meet his demands, said Rep. Jerry Lewis (Calif.), the ranking Republican on the House Appropriations Committee. He added, "And I think we'll have enough Republicans to sustain a veto."

White House spokesman Tony Fratto emphasized last night, "The White House is not part of any deal, full stop."

The veto threats in the face of Democratic compromises left party lawmakers in disbelief. Because of Bush's intransigence, Sen. Patty Murray (D-Wash.) said that "we're going to have some horrific decisions to make over the next week."

Democratic leaders tried to put the best face on their surrender on domestic spending levels, promising that the final bill will reflect their priorities, if not their preferred funding -- "the president's number, our priorities," said House Speaker Nancy Pelosi (D-Calif.). She noted that the bill would increase funding for children's health programs, nutrition and medical research at the National Institutes of Health.

Democrats will also increase spending on heating assistance for the poor, health care for veterans, local law enforcement and border security, Democratic leadership aides said last night.

To meet those goals, staff members on the House Appropriations Committee will probably target the president's "Millennium Challenge" international aid program, his abstinence-education efforts and the scandal-plagued "Reading First" education effort.

Senate Republicans will seek to add as much as $70 billion in war funding to the bill, without strings on the withdrawal of U.S. troops from Iraq attached. Pelosi indicated she would vote against the final bill if such funds are included but made clear that Democrats are ready to make the concessions needed to avoid a veto.

"This is a negotiation about a bill that will be signed by the president," she said.

The retooled version of the energy bill still includes higher standards for motor vehicle and appliance efficiency, as well as a requirement for vastly expanded use of ethanol and other biofuels. The tax package would offset expanded energy conservation incentives by trimming tax breaks and depreciation allowances for the biggest oil firms.

The House AMT bill would prevent 21 million middle-income American households from being hit with a tax increase that could average $2,000 per family from a levy designed in 1969 to target only the super-rich. The proposal would also increase the number of low-income families that could benefit from a refundable tax credit for children.

The plan's outlook in the Senate is not good. The ranking Republican on the House Ways and Means Committee, Rep. Jim McCrery (La.), called it "dead on arrival."

"What we are watching is a Kabuki dance," he said. "The Senate made it clear, with a bipartisan 88 to 5 vote last Thursday, that it will pass an AMT patch without unnecessary tax increases." Bush also opposes the House measure.

Staff writer Jeffrey H. Birnbaum contributed to this report.

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