Congress Passes $2.9 Trillion Compromise Democratic Budget Plan

Thursday, May 17th 2007, 10:06 pm

By: News On 6

WASHINGTON (AP) _ Majority Democrats passed an important test Thursday with approval of a $2.9 trillion budget plan that promises big spending increases for party priorities such as education and health care.

The budget blueprint sets a course to produce a small surplus in five years by assuming that many of President Bush's tax cuts would expire. Putting the budget framework in place also sets up veto confrontations with Bush over increases for domestic programs.

The nonbinding measure for the budget year that begins Oct. 1 does not go to Bush for his signature or veto. Rather, it sets parameters for Congress to follow when writing tax and spending legislation later this year.

The House passed the measure by a 214-209 vote without a single Republican voting for it. The Senate quickly followed on a 52-40 vote; moderate Republicans Olympia Snowe and Susan Collins of Maine joined with Democrats.

The measure moves to bolster domestic programs whose budgets Bush has curbed and lets expire tax cuts that have benefited upper-bracket taxpayers.

``The budget rejects the misplaced priorities of the Bush administration, which wants to hand out tax breaks worth $150,000 a year to those making more than a million dollars, while making deep cuts in education and Social Security benefits,'' said Senate Majority Leader Harry Reid, D-Nev.

The budget plan was seen as a critical test of Democrats' ability to govern and they were eager to produce a surplus after criticizing Republicans for running steady deficits since 2002.

But deficits under the Democratic plan would be higher over the next two years than the $150 billion to $200 billion the Congressional Budget Office predicts for the current year. A $41 billion surplus is projected for 2012.

The blueprint's most immediate effect is clearing the way for action this summer on 12 annual spending bills for 2008 that total $1.1 trillion. That figure includes $145 billion for military operations in Iraq and Afghanistan and a $481 billion ``core'' Pentagon budget with a record increase of more than $50 billion.

The White House has pledged numerous vetoes over Democrats' plans for a $23 billion increase over Bush's request for nondefense agency budgets. Democrats plan increases averaging 5 percent for domestic programs, including education, community development grants and veterans' medical care.

Wasting no time, a House Appropriations panel on Friday planned to approve a $36.2 billion homeland security bill that exceeds Bush's request by about 6 percent.

Even with the spending increase, the measure may prove too popular for Bush to carry out his threat.

Republicans criticized the Democratic plan for the spending increases and for assuming numerous tax cuts passed in Bush's first term will expire.

They noted it projects a surplus of $41 billion in 2012 by assuming that more than $200 billion worth of tax cuts over 2011-12 _ on income, stock dividends and capital gains, among others _ expire as scheduled at the end of 2010.

Democrats promise to extend $180 billion worth of tax relief aimed at the middle class. That includes a 10 percent rate on the first $12,000 of a couple's income and relief for married couples and people with children.

Republicans faulted the Democratic plan for failing to address looming shortfalls in benefit programs such as Medicare, Social Security and Medicaid. Spending on such programs increases automatically with inflation and as new beneficiaries become eligible.

``Next year the baby boomers start retiring and we're not ready for them,'' said Rep. Paul Ryan of Wisconsin, the to Republican on the House Budget Committee.

The budget plan would lock in a promise by Democrats to restore pay-as-you-go rules. Republicans abandoned these in 2001 to pass Bush's tax cuts.

Under those rules, no tax cut or benefit increase in programs such as Medicare, children's health care or farm subsidies can occur if it adds to the budget deficit.

There are ways around the rule, however. It may be waived when Democrats this year renew a health insurance program for children of the working poor or try to forestall a hidden tax increase that hits the middle class.

The alternative minimum tax was enacted in 1969 to make sure the wealthy pay at least some tax. But because it was never indexed for inflation, it threatens to ensnare 20 million additional middle-class taxpayers unless Congress steps in.

The budget plan sets the stage for an $850 billion increase in the national debt _ to $9.8 trillion. Under a House rule endorsed at different times by both Democrats and Republicans, adoption of the budget resolution means a separate debt limit increase bill is automatically passed and sent to the Senate.