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The Budget

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Senate Passes First
Balanced Budget
In 30 Years

By Eric Pianin
Washington Post Staff Writer
Friday, April 3, 1998; Page A20

The Senate last night voted 57 to 41 to approve the first balanced budget in 30 years after Republican leaders struck a last-minute agreement with conservatives in their party to ensure substantial tax cuts next year.

Senate Republican leaders said they would support tax cuts in the range of $60 billion to $80 billion over five years, yielding to pressure from Sen. John D. Ashcroft (R-Mo.) and other conservatives who demanded far more than the $30 billion allowed in a Senate budget plan.

Senate leaders also agreed to join with House Republicans in making the elimination of the income tax's so-called marriage penalty a top priority this year and to pursue other tax measures as part of a large budget package that will be voted on late this spring.

The $1.7 trillion balanced budget plan, crafted by Senate Budget Committee Chairman Pete V. Domenici (R-N.M.), would increase government spending next year by a modest 3.5 percent and produce accumulated surpluses of $149 billion over the coming five years.

Just as President Clinton proposed, the surpluses would be used to begin reducing the $5.4 trillion federal debt while Congress and the administration work out a long-term plan for preserving the Social Security system. But the Senate plan would jettison most of Clinton's spending initiatives for education, child care, expanded health care and other programs, and use about $65 billion of a proposed tobacco industry settlement to keep the financially troubled Medicare system afloat until comprehensive long-term reforms of the health care program are put in place.

"We look forward to an era of balanced budgets, an era of solid economic growth, an era when we fix Social Security permanently, fix Medicare permanently and we actually put our budget where our mouth is," Domenici said of the plan.

Fifty-four Republicans and three Democrats -- Sens. Max Cleland (Ga.), Daniel Patrick Moynihan (N.Y.) and Charles S. Robb (Va.) -- voted for the Senate plan. Senate Minority Leader Thomas A. Daschle (D-S.D.) said, "Many of us don't like this bill because we believe that it doesn't recognize the importance of the investments that this president has outlined."

The House Budget Committee is scheduled to unveil a competing budget plan some time after the two-week April recess. Once the House completes work on that proposal, conferees from the two chambers will meet to agree on a final pattern for spending and tax policy for the coming year. Congress then must pass -- and the president must sign -- 13 separate spending bills covering defense, domestic spending and foreign aid before Oct. 1, the start of the new fiscal year.

Clinton, just back from a visit to Africa, said last night: "While I'm pleased that the Senate followed our lead by maintaining fiscal discipline and reserving the surplus until we save Social Security, I remain deeply concerned that their budget would squeeze out critical investments in education and our children."

The Senate's commitment to larger tax cuts could also spark an election-year conflict between Congress and Clinton, who proposed $24 billion in tax cuts through 2003. Some Republicans believe such a fight would energize their conservative base, despite polls showing that many Americans are conflicted about the need for additional tax cuts.

Ashcroft and Sens. Rod Grams (R-Minn.) and Robert C. Smith (R-N.H.) announced Wednesday that they would vote against the budget unless the leadership made major concessions on taxes. With two other conservatives threatening to defect, and Democrats largely opposed to the plan, Senate Majority Leader Trent Lott (R-Miss.) had no choice but to make peace with the conservatives.

Yesterday's agreement with conservatives ensured passage of the bill, but in the process Lott was forced to undercut Domenici, who had counseled a more modest round of tax cuts. An aide to Domenici said last night the senator had been kept fully informed of Lott's talks with the conservatives and that he had known for some time that the Senate would eventually have to accommodate the House with a larger tax package.

"We said all along the way that if people could find additional offsets to pay for a larger tax cut then our attitude was, 'Go for it,' " said Robert G. Stevenson, Domenici's press secretary.

Senate Majority Whip Don Nickles (R-Okla.), a tax-cut enthusiast who took part in the talks, confirmed the general outlines of the agreement. "We want to try to maximize the tax cuts as much as we can," he said, adding, "We do want to put a real emphasis on trying to eliminate the marriage penalty."

Proposals for providing tax relief for married couples who must file joint tax returns and consequently are forced into a higher tax bracket than if they filed separate returns have attracted strong support from Republicans and Democrats in both chambers. But the proposals are expensive. The one backed by Ashcroft and his allies in the Senate, for example, would cost the Treasury $29 billion annually.

As part of the understanding, Senate budget conferees would be instructed to accept the House Republicans' proposals for future tax cuts as the basis for negotiations. Although the House Budget Committee has yet to unveil its plan, House Ways and Means Committee Chairman Bill Archer (R-Tex.) and other House leaders have floated proposals for $60 billion to $80 billion of tax relief over the next five years.

The Senate yesterday also voted 59 to 40 to support the GOP idea of terminating the income tax code after 2001 without specifying how to replace it. However, the non-binding resolution stressed the importance of preserving the tax deductions for mortgage interest and charitable contributions.

The Senate budget plan projects an $8 billion surplus this year and next, which would be the first time the government avoided deficit spending since 1969. A strong economy that drove up federal revenue and reduced demand for welfare, unemployment insurance and other federal programs was a major factor in finally wiping out the deficit.

© Copyright 1998 The Washington Post Company

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