By a 216-210 margin, the House this afternoon passed a budget resolution for FY 2008 . The $2.9 trillion nonbinding blueprint calls for a $153 billion surplus by 2012, a nearly $25 billion increase for domestic programs, and restoration of the PAYGO budget discipline rule.

The GOP alternative, offered by ranking GOP member Rep. Paul Ryan (R-WI), which would have cut entitlement spending by $270 billion over five years, added $168 billion to the deficit, and violated the House PAYGO rule, was defeated 160-268. It never had a chance, with 40 GOP members bucking leadership -- GOP ranks were split about 4-to-1 in favor.

House and Senate conferees will be appointed to work out the modest differences between H. Con. Res. 99 and the Senate resolution passed last week. The compromise resolution would ultimately provide guidelines only to Congress as it moves into the appropriations phase of the budget-making process; as a resolution, it never goes to the President for his signature.

Nevertheless, as we have remarked, the final product will invariably add only about three percent to the President's FY 2008 proposed domestic discretionary spending levels.

On the other hand, it will also invariably include a new congressional PAYGO regime for the first time since early in the Bush administration when the President and the GOP Congress allowed the Budget Enforcement Act to expire and deficits to explode.

While reestablishing a commitment to paying for changes to mandatory spending and taxes in the budget, the Democratic Leadership plan still boosts discretionary spending levels for under funded and neglected national priorities and investments, such as Head Start, child care, and housing. The Democrats' budget would allow about $25 billion more in discretionary spending in 2008 than President Bush has requested, and about $7 billion more than the Senate-adopted plan. In addition, like the Senate plan, the House budget would add additional funds (and deficit-neutral offsets) for mandatory nutrition and health care programs.

While this is only a first step in repairing some of the damage done to important priorities in the federal budget over the past six years and before, it seems the Democrats have used a recipe that is neither too hot nor too cold, but just about right.

In his Buzz Column this week, Budget Buffet ($), Stan Collender expresses surprise "that a budget resolution is moving ahead at all, let along so quickly," applauding the seriousness and fiscal discipline with which Congress is pursuing the budget process thus far. Yes, after years of feckless fiscal policy in Washington, "this has the possibility of being a turning point."

But in fact incrementalism is the hallmark of the budget resolutions moving through Congress. (The Senate adopted its resolution last Friday; the House is expected to debate its version tomorrow and vote on it Thursday.) Given the sea change one sees in Congress in its willingness to challenge the President's war policy, one might have expected a more concerted effort by Democrats to put their own policy stamp on the FY 2008 budget.

For speculation on why this hasn't happened, see this analysis by yours truly and this perspective, from Collender:

[I]ncremental change was all that was likely this year and the best that anyone should expect. The narrow margins in the House and Senate, extreme partisanship, and a Congress and White House controlled by different political parties meant from the start that a budget deal of any kind was extremely unlikely. There never was going to be a deal over entitlements and taxes this year. It didn't take a fortune teller to read these budget tea leaves.

Now that the House Budget Committee has approved its budget resolution for fiscal year 2008 (we noted its differences with its Senate counterpart here), the full House will take it up, with a final vote expected next week.

The Center of Budget provides a thorough summary of the House resolution, which points out that the budget plan "is notable for adhering to the Pay-As-You-Go rule the House adopted earlier this year."

Ironically, however, the House PAYGO rule does not actually require a deficit netural budget for FY 2008:

It shall not be in order to consider any bill, joint resolution, amendment, or conference report if the provisions of such measure affecting direct spending and revenues have the net effect of increasing the deficit or reducing the surplus for either the period comprising the current fiscal year and the five fiscal years beginning with the fiscal year that ends in the following calendar year or the period comprising the current fiscal year and the ten fiscal years beginning with the fiscal year that ends in the following calendar year.

The Senate approved a $2.9 trillion fiscal 2008 budget resolution this afternoon, 52-47. Maine GOP Sens. Olympia Snowe and Susan Collins joined the 50 Democrats voting to adopt the budget plan, which aims to balance by budget by 2012 and provides $18 billion more in domestic discretionary spending next year than President Bush's proposed budget. The resolution restores a pay-as-you-go point (PAYGO) of order against legislation that would cut taxes or increase mandatory spending without offsets.

Yesterday, the House Budget Committee passed its own budget resolution -- in the main, a close replica of the Senate plan, but adding $25 billion in domestic discretionary spending more than the president's budget. The plan is expected to be debated and voted on by the full House next week.

I don't assert that this is a perfect budget. But at the end of the day, the test for us is, 'Can we write a budget for our country?'

The Senate has just completed roll-call votes on the following estate tax amendments:

• Sen. Ben Nelson (D-NE), to allow the Finance Committee to craft deficit-neutral legislation to reform the estate tax by establishing an individual exemption of $5 million and a tax rate of 35 percent for the portion of estates above this amount. Rejected, 25-74.
  
  
• Sen. Jon Kyl (R-AZ), to allow the Finance Committee to craft estate tax reform legislation that establishes an individual exemption of $5 million, indexed for inflation and a tax rate of no more than 35 percent and to permanently extend the deduction for teachers? out of pocket expenses; reduces revenue totals and increases the deficit by more than $30 billion in 2011 and 2012. Rejected, 48-51.
  
  
• Sen. Jim DeMint (R-SC), to eliminate the estate tax. Rejected, 44-55.

Thanks to everyone who helped defeat these destructive amendments! Your efforts really paid off!

The amendment by Sen. Max Baucus (D-MT), referred to below, was not only first in order but first in significance among the amendments adopted yesterday during the Senate budget resolution floor debate. At a cost of about $195 billion over 2010-12, consuming all of the budget surplus projected in the resolution, the amendment

• extends middle class tax cuts including the 10 percent tax bracket, marriage penalty relief, and the child tax credit, strengthens the adoption tax credit, and provides combat pay under the EITC
• extends the current estate tax rate and exemption level, rather than returning to 2001 levels after 2010
• provides $15 billion for renewal and expansion of SCHIP

Sen. Judd Gregg (R-NH) complained that "traditionally, you always give the minority the first amendment" and one GOP tax aide remarked: "they guessed our first amendment."

By winning the first budget resolution vote with his amendment, Sen. Baucus effectively pre-empted the GOP from staking a claim on the projected surplus. "Democrats didn't create a surplus [in the budget resolution] in order for Republicans to divert it to special-interest tax cuts," a tax aide said. Sen. Baucus added: "They can offer anything they want [now], but the surplus will be all used up."

As a kind of policy placeholder, the amendment suggested all but unanimous support for extending the Bush 2001 and 2003 middle-class tax cuts. [The subsequent vote on an amendment by Sen. Jon Kyl (R-AZ) to extend the Bush capital gains, dividends, and estate tax cuts failed by four votes -- with every Democrat present and Sens. Olympia Snowe (R-ME) and George Voinovich (R-OH) voting against.]

Posted by Dana Chasin, 02:43:18 PM



Senate Budget Debate: Amendment Recap and Preview

The Senate debated and voted on seven amendments to its FY 2008 budget resolution yesterday, four of which passed:

• Sen. Max Baucus (D-MT), to dedicate projected surpluses to extend a range of middle-class tax cuts and expand the State Children's Health Insurance Program (SCHIP) -- adopted, 97-1
• Sen. Jim Bunning (R-KY) , to create a point of order against any budget resolution that fails to achieve an on-budget balance within 5 years-- adopted, 98-0
• Sen. John Cornyn (R-TX) to create a 60-vote point of order against tax hikes -- adopted, 63-35
• Sen. Jeff Bingaman (D-NM), to provide $1 billion to the National Science Foundation and other science institutes to research competitiveness improvements, with offsetting spending cuts -- adopted, 97-1

The following amendments were defeated:

• Sen. Jon Kyl (R-AZ), to extend education tax incentives, the capital gains and dividend tax cuts and to raise the estate tax exemption to $5 million while lowering the maximum estate tax rate to 35 percent -- rejected, 51-47
• Sen. Jeff Sessions (R-AL), to exempt all expiring 2001 and 2003 tax cuts from pay/go offset rules -- rejected, 52-46
• Sen. John Ensign (R-NV), to separate binding limits for defense and non-defense appropriations in the budget resolution and create a 60 vote point of order against exceeding these limits -- rejected, 47-51

Votes on more GOP amendments are expected throughout the day today, including:

• Sen. Jim DeMint (R-SC), for Social Security reform that would give recipients "the benefits of savings and investment [emph. mine], while permitting the pre-funding of at least some portion of future benefits"
• Sen. John Cornyn (R-TX), to reduce the federal SCHIP matching rate for children in families with incomes above 200 percent of the federal poverty line

The House Budget Committee has begun its mark-up of committee chair John Spratt's (D-SC) FY 2008 Budget Resolution "Mark." Spratt's plan differs only slightly from the budget resolution drawn up by Senate Budget Committee chair Kent Conrad (D-ND), currently being debated on the Senate floor.

Notably, however, Conrad does not call specifically for any tax cuts extensions, while Spratt assumes extensions of several expiring provisions, including:

• the 10 percent bracket
• marriage penalty relief
• the child tax credit
• "moderate" estate tax reform
• state and local sales tax deductibility

Regarding spending, the Center on Budget caluclates:

• CBO's baseline for domestic discretionary is $405.5 bn.
• Spratt provides $417.8 bn. -- $12.3 bn. over baseline
• Conrad provides $412.7 bn. -- $7.2 bn. over baseline
• President Bush requested $392.5 bn.

The President's budget projected a federal budget surplus in 2012 of $61 bn.; Spratt's Mark projects a $153 bn. surplus that year; the Senate figure is $132 bn. Spratt assumes a one-year AMT patch; the Senate Budget Resolution provides for a two-year patch.

For more details on Spratt's proposed House Budget Resolution:

• Key Features of the Chairman's Mark
• Overview of the Chairman's Mark
• Legislative Text
• Tables of Functional Area Numbers

The Center on Budget and Policy Priorities is arguing that repealing the tax cuts would be good for the economy.

Bush & Co. like to claim that the tax cuts are magic, and that failing to extend them will be a disaster for the economy. They're wrong, and it's great that CBPP is pointing this out.

But this new paper seems to suggest that the repealed tax cuts should be devoted entirely to deficit reduction because reducing the long-term budget imbalance would be good for "the economy." But what if we repealed the tax cuts not only to reduce the long-term imbalance, but to pay for new programs that counteracted the trend toward greater inequality?

I mean, who would a more sound "economy" be good for? Growth these days doesn't seem to be too evenly distributed, as CBPP has documented so well. Any marginal increase in economic growth due to the repealed tax cuts would probably go to the same people that have done well the last 30 years- the top 10 percent of earners, particularly the top 1 percent.

One final thought- the subtext here is that increased revenues are somehow the solution to the long-term budget imbalance. More revenues may be necessary- but what matters more is what they're paying for. The cause of the long-term budget problem is our overpriced and inhumane health care system. What we need to pay for is a fundamental restructuring of the health care system that addresses long-term costs.

The Budget Resolution adopted yesterday by the Senate Budget Committee was a case of half-full/half-empty, depending on your policy perspective. It directs additional resources toward domestic social programs and keeps defense and homeland security spending on track with Bush's proposed levels, raising the discretionary spending cap by a (modest, we think) $18 billion out of $948.8 billion. Still, President Bush has repeatedly promised in the past to veto a resolution that exceeds his proposed cap by any amount.

The resolution restores the Senate PAYGO rule and adds a 60-vote point of order against entitlement or tax legislation that would increase the budget deficit, until the president proposes and Congress approves legislation to restore solvency to the Social Security trust funds.

The half-empty view stems from the revenue projections the resolution relies upon to get to a $132 billion budget surplus by FY 2012 -- most of it focused on the resolution's use of reserve funds." These are optional provisions that allow spending or revenue totals and committee allocations to be adjusted to accommodate specific new spending programs, provided they are "deficit-neutral," with costs offset via unspecified spending cuts or revenue increases.

By their nature, reserve funds they are optional and their offsets are unspecified. But since they identify specific spending priorities and amounts, they have the look-and-feel, if not quite not the status of reconciliation instructions. This resolution comes with 22 such funds, more than twice the all-time previous record. This may explain comments such as:

• "This budget puts a burden on the Finance Committee to come up with $916 billion" -- Finance Committee ranking member Charles Grassley (R-IA)
• "[Finance Committee ranking member Judd] Gregg (R-NH) argued that [it] ensures that most of the tax cuts that will expire by 2010 will not be extended. He said that would amount to $900 billion in tax increases in the future."

The debate will proceed in Congress along the following (tenative) schedule:

• March 16: Senate Budget Committee files report on FY08 BR
• March 20: Senate Floor action on FY08 BR
• March 20 or 21: House Budget Committee mark-up of FY08 BR
• March 23: Senate floor vote on the FY08 BRFY
• Week of March 26: House Floor debate on FY 2008 Budget Resolution

Today, the Senate Budget Committee is marking up the draft Senate Budget Resolution for FY 2008, released yesterday. Amendments from both sides of the aisle are being introduced, debated, and voted on. The Committee will vote on the resolution itself, with any approved amendments, by the close of business today.

The Committee has made available a number of documents relating to the resolution, including:

• Legislative Text, FY 2008 Senate Budget Resolution
• Opening Remarks by Chairman Kent Conrad (D-ND) at Senate Budget Committee Mark-Up
• Chair's Charts
• Detailed Explanation
• Short Summary
• Fact Sheet on Revenues

The Center on Budget's Statement on the Senate Budget Committee Plan today scolds commentators for scolding Committee chair Kent Conrad (D-ND) for failing to specify the offsets for program expansions and tax-cut extensions assumed in his budget resolution mark. This reflects the press'

misunderstanding of the role the budget resolution plays... Budget Committees are not allowed to use the budget resolution to dictate to other committees exactly what actions they should take on the budget [or] to determine how overall discretionary funding will be distributed among the various Appropriations Subcommittees. [Under PAYGO, I]t is appropriate that budget resolutions rely once again on deficit-neutral reserve funds to identify high-priority goals and accommodate legislation to achieve those goals.

The Statement is a timely reminder of the critical but limited role of budget resolutions. But maybe the press commentary the Center objects to stems to some degree from the distraction Conrad himself provides via offsets and revenue assumptions based on a wing and a prayer.

For example, this from the New York Times:

Mr. Conrad and other Democrats are placing high hopes on recovering some $300 billion a year that the Internal Revenue Service estimates it loses from people and companies that underreport their incomes.

Yes, as the Center points out, budget resolutions set and enforce overall targets for federal spending and revenues, indicate Congressional budget priorities, and point the way for subsequent legislation that fills in the details of the budget.

Conrad's blueprint assumes $439 billion dollars more in revenues over five years than Bush's dubious projection (based on an assumption of seven percent annual revenue gains over five years) -- so it does give the Senate Finance Committee a lot of work to do in coming up with offsets for reserve funds, AMT reform, tax cuts extensions, and new spending.

Senate Budget Committee chair Kent Conrad (D-ND) provided reporters with some details yesterday about the budget resolution draft that his committee will mark up today and tomorrow.

Some features are good news:

• priorities -- Conrad's draft provides a $16-18 billion increase in domestic appropriations over Bush's proposal for FY 2008, with substantial increases in education, veterans, and community policing programs, and, on the mandatory spending side, $50 billion for SCHIP over the next five years
• surplus projections -- Conrad projects a federal budget surplus of $132 billion in FY 2012 and, unlike Bush, acknowledges the difficulty of reaching his goal since, given PAYGO constraints, extending the Bush 2001 and 2003 tax cuts and halting AMT's expansion will have to be offset to the tune of $800 billion in new revenues

Some features are no better than the Bush budget:

• assumptions -- Conrad conveniently assumes the exact same five-year levels of Iraq war spending as Bush does, which is ironic, since Conrad criticized Bush for "fail[ing] to include full out-year war costs"; he also assumes that, after a two-year patch, AMT revenues would continue to roll in, unabated (the second patch year may afford time for AMT reform)
• punting on tough choices -- Conrad identifies offsets for only $15 billion out the $50 billion he provides for SCHIP, relying on a "reserve fund" (a kind of "offset-to-be-named-later") to make up the difference down the road, with a much bigger reserve fund to pay for the Bush tax cuts, to the extent they are extended

Many important elements of the mark -- revenue projections, discretionary spending caps, instructions to committees -- await disclosure when the Budget Committee meets to consider it later today.

Administration projections that its FY 2008 federal budget proposal would yield a surplus by FY 2012 were contradicted today by the Congressional Budget Office (CBO) scoring of the President's plan.

The bottom lines:

• the Bush budget will fail to balance in 2012 by $9 billion (see Table 1); CBO's estimate projects $119 billion less in revenues in 2012 than does OMB's
• domestic discretionary spending for FY 2008 is scored at $932 billion (Table 4), up from the President's proposed $928.9 cap

The CBO score sets the baseline for the upcoming House and Senate Committee budget resolutions, mark-ups for which are expected the week of Mar. 12

It assumes the $50 billion budgeted by the President for military operations in Iraq and Afghanistan in 2009 but no further funding thereafter, as well as the Administration's failure to propose changes to the AMT beyond the one-year "patch" extension.

If anything, the new CBO estimates will probably only further incline Democratic budgetmakers drafting the FY 2008 budget resolutions to disregard the bottom lines and policy priorities of the President's proposal.

If you found Senate Budget Committee chair Kent Conrad's comments on the Budget Resolution quoted in our blog yesterday inscrutable, you are not alone. Policy wonks, journalists, lobbyists, industry groups, and aides have spent much of the past two days trying to interpret the meaning of Conrad's promise, "no tax rate increases," given his broader promise of balancing the budget by 2012.

So we offer an abridged Conrad Lexicon, to assist in parsing the delphic utterance:

No tax rate increases will in be in the budget I propose, I'm not anticipating a tax rate increase in 2011 or 2012 either. [Additional revenues will be] very, very modest and it will be based on going after tax gap and tax reform to broaden the base and keep rates low.

• "no tax rate increases" -- the missing words here are "under current law." Conrad cannot be said to be raising rates if he assumes the Bush 2001 and 2003 tax cuts are not extended, and that rates revert to pre-2001 level under current law, but that those rates wouldn't be increased
• "in 2011 or 2012" -- the budget resolution will have to show revenue estimates reflecting Conrad's policies in the last two years of the five-year balanced budget plan. But if revenues spike in those years, Republicans will argue Democrats are setting the stage for tax increases
• "broaden the base" -- closing the tax gap will probably yield relatively modest additional revenues en route to a balanced budget; so Conrad adds "broadening the base," a euphemism for increasing taxable income (by widening brackets; eliminating exclusions, loopholes, credits, and deductions, etc.)

Coming to a chamber floor near you! CQ($):

The House Appropriations Committee has set a "target date" of March 7 to mark up the fiscal 2007 supplemental measure, Rep. David R. Obey, D-Wis., the committee chairman, said Wednesday. The goal is to bring the bill to the floor the following week.

The Senate Appropriations Committee intends to mark up its own version of the bill March 20, according to its chairman, Robert C. Byrd, D-W.Va. Senate Majority Leader Harry Reid, D-Nev., has said he would like to have the bill on the floor the last week of March.

UPDATE: Via CQ($) - House consideration of the supplemental is expected to be March 8