Democrats Predict Budget Surplus If Tax Cuts Expire

Wednesday, March 28th 2007, 6:37 pm

By: News On 6

WASHINGTON (AP) _ House Democrats pressed ahead Wednesday with a budget plan predicting a sizable surplus in five years, but only if President Bush's tax cuts expire in 2010 as scheduled.

The majority Democrats' $2.9 trillion budget outline for next year would produce a $153 billion surplus in 2012 while raising spending for veterans, education, defense and national security.

Democrats say the plan would finally mean a surplus after years of red ink under Bush and a GOP-controlled Congress.

Republicans said allowing tax cuts passed in 2001 and 2003 to expire in 2010 would amount to the ``largest tax increase in American history.''

The future of the Bush tax cuts will likely be decided after the 2008 presidential election. While in the majority, congressional Republicans never held votes to make all of them permanent, despite Bush's annual calls to do so.

Under Congress' budget process, the annual budget resolution is a nonbinding outline that guides future legislation. It allows the two parties to show voters their competing fiscal visions, often without having to take the politically difficult votes to implement them.

The Democratic budget blueprint calls for a nearly $25 billion increase next year for domestic programs popular with lawmakers in both parties, approving Bush's record budget increase for the Pentagon's non-war budget and $145 billion for operations in Iraq and Afghanistan next year.

Those spending boosts would cause the deficit to rise from $209 billion this year to $241 billion in 2009 before increased revenues from the expiration of the 2001 and 2003 tax cuts rapidly generate a surplus.

Republicans credit those tax cuts _ on income, investments, estates, married couples and families with children, among other things _ with reviving the economy from a recession early in Bush's first term.

Extending those tax cuts would cost about $250 billion in 2012 alone. Democrats acknowledge many of the provisions _ especially those aimed at middle-income taxpayers _ will be renewed.

``That decision will be taken when we reach it. When we have to cross that bridge, we'll cross that bridge,'' said House Budget Committee Chairman John Spratt Jr., D-S.C. ``We hope we'll have a surplus by that point in time.''

For now, the budget plan would require lawmakers seeking to cut taxes or boost benefit programs _ such as Medicare, children's health care or farm subsidies _ to ``pay for'' the changes with tax increases or offsetting spending cuts.

That rule would greatly complicate efforts later this year to boost funding for a popular health insurance program for poor children.

Democrats opted to put off politically painful decisions on shoring up the finances of Medicare and Social Security.

Republicans countered with an alternative plan cutting $279 billion from federal benefit programs such as Medicare and Medicaid over the next five years _ far greater cuts than proposed by Bush in February.

The plan, authored by Paul Ryan of Wisconsin, top Republican on the budget panel, would fully extend the 2001 and 2003 rounds of tax cuts, at a cost of about $450 billion. But Ryan's plan is certain to lose by a big margin Thursday.

The Democratic measure is largely a response to complaints that Bush has shortchanged programs funded each year by appropriations bills _ including education, health research and grants to local governments _ while offering big increases to the Pentagon and providing tax cuts tilted toward affluent, GOP-leaning constituencies.

But the Democratic budget also suffers from key flaws Democrats such as Spratt have seen in Bush's budgets.

Both plans fail to account for the long-term costs of overhauling the alternative minimum tax so it does not raises taxes on more than 20 million middle-class taxpayers.

And the Democratic plan mirrors Bush's request for the wars in Iraq and Afghanistan, which assumes no funding after 2009.

``It is simply immoral for this government to continue to mortgage our children's futures through policies that lead only to growing deficits and deeper national debt,'' said Majority Leader Steny Hoyer, D-Md.