Squabble Snags Obama Budget

Democratic Lawmakers At Odds Over Pay-as-You-Go Rules

Days after President Obama asked Congress to "work with me" to pass tough new deficit-reducing budget rules, Democratic lawmakers were squabbling over the issue in a last-minute fight that temporarily derailed Obama's ambitious $3.5 trillion budget plan.

A House-Senate conference committee met yesterday afternoon but broke up without approving Obama's budget request, which the administration hopes to push through both chambers by tomorrow, Obama's 100th day in office.

House Budget Committee Chairman John M. Spratt Jr. (D-S.C.) said the two sides were at odds over pay-as-you-go budget rules that would prohibit new initiatives that increase the annual budget deficit.

Under pressure from the group of fiscally conservative Democrats known as the Blue Dogs, House leaders have agreed to hold a vote on those rules and enshrine them in federal law. But Senate leaders have refused to do so.

Late yesterday, Democratic aides said the matter had been resolved, clearing the way for a vote on the budget today in the house. But without a clear commitment to strong budget rules, aides said the Blue Dogs' 51 votes are not guaranteed.

At issue is how to handle Obama's plan to substantially increase the deficit compared with current law. Obama is proposing to extend a variety of tax cuts for the middle class that were enacted under President George W. Bush. Obama also wants to maintain the estate tax at its current level rather than permit it to return to a previous, higher rate. And he wants to prevent the alternative minimum tax from striking millions of middle-class families as it is scheduled to do under current law.

Those changes would increase annual budget deficits by more than $2 trillion over the next decade compared with current law, and the House has approved a budget resolution that clearly spells out the changes. It also says that, before those changes can take effect, Congress would have to enact a new pay-as-you-go, or PAYGO, law that prohibits any additional tax cuts or new spending unless the costs are covered by tax increases or spending cuts.

The Senate took a different approach, neglecting to spell out precisely how much Obama's tax plans would increase the deficit and establishing no benchmark against which future spending could be measured.

Due to slowing tax collections, economic stimulus spending and various financial sector bailouts, the deficit is projected to approach $1.9 trillion this year. Under Obama's budget request, as amended by congressional Democrats, the deficit would hit $1.2 trillion in the fiscal year that begins in October and remain elevated through 2014, when it is projected to hit $523 billion.

Deficit hawks support the House approach because it "draws a bright line between things you're not going to pay for and things you are going to pay for. If you don't draw that line, then you have very little chance" of preventing the deficit from spiraling further upward, said Jim Horney, a budget analyst at the Center on Budget and Policy Priorities.

On Friday, Obama appeared to throw his weight behind the House approach as well, sending letters to House and Senate leaders urging them to enact a PAYGO measure that is supported by the Blue Dogs. Obama also devoted his Saturday radio address to the subject, saying "we need to adhere to the basic principle that new tax or entitlement policies should be paid for."

Senate leaders have balked, however, and Senate Budget Committee Chairman Kent Conrad (D-N.D.) said a PAYGO law would give the White House extraordinary control over the budget process. It could also complicate efforts to push legislation through the closely divided Senate, which has repeatedly violated the PAYGO principle.