House Democrats Clear Budget Bill for Passage

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By Lori Montgomery and Shailagh Murray
Washington Post Staff Writers
Tuesday, April 28, 2009; 2:23 PM

House Democrats resolved an internal squabble over a $3.5 trillion fiscal 2010 budget plan, clearing the way for final passage of the blueprint tomorrow, to mark President Obama's 100th day in office.

The blueprint preserves all of Obama's major domestic policy priorities while seeking to cut the deficit in half by 2012. The plan includes special reconciliation instructions to smooth passage of health-care reform and a record expansion in college tuition assistance, two Obama campaign pledges that could become law before the end of the year.

The budget also leaves room for an ambitious global warming bill, but that legislation would not be protected by reconciliation rules, dimming its prospects for the foreseeable future. Moderate Senate Democrats are skittish about the Obama approach, which would subject industry to a cap on carbon emissions, because they fear the compliance costs would be passed on to consumers.

For weeks, Obama's budget plan advanced smoothly through Congress, but negotiations over a final blueprint hit a snag over the weekend when House Majority Leader Steny H. Hoyer (D-Md.) sought to toughen deficit-reduction rules to prohibit new initiatives unless they are offset by spending cuts or revenue increases. Under pressure from the group of fiscally conservative Democrats known as the Blue Dogs, House leaders agreed to hold a vote on those rules and enshrine them in federal law. But Senate leaders have refused to do so.

Late yesterday, House Democratic aides said the matter had been resolved, without any further Senate concessions. White House officials had urged budget negotiators to deliver a final product before the 100-day mark, and with House and Senate votes set for tomorrow, that deadline now appears likely to be met.

At issue for the Blue Dogs 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 during 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.

Because of 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.


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