Senate panel OKs 2008 Budget

Thursday, March 15th 2007, 7:13 am

By: News On 6

WASHINGTON (AP) _ A Senate panel Thursday approved a budget blueprint that awards near-term spending boosts for Democratic favorites such as education and veterans programs, but postpones difficult decisions on taxes, Social Security and Medicare.

The Senate Budget Committee approved the $2.9 trillion plan by a party-line 12-11 vote over objections from panel Republicans who insisted it would guarantee the demise of President Bush's tax cuts.

The budget plan is nonbinding but lays out Democratic preferences on tax and spending policies. Its most immediate impact would be to award increases to domestic programs while making it difficult for lawmakers to finance tax cuts or to use budget deficit dollars to increase spending on federal benefit programs like Medicare.

Senior panel Republican Charles Grassley, R-Iowa, protested that the Democratic plan, authored by Budget Committee Chairman Kent Conrad, D-N.D., would produce ``the largest tax increase ever.''

Grassley scoffed at Conrad's claims that revenues from closing tax loopholes and better IRS collections could pay for renewal of Bush's 2001 and 2003 cuts in taxes on income, married couples, investments and inheritances.

``This budget puts a burden on the (tax-writing) Finance Committee to come up with $916 billion,'' Grassley said Thursday.

While claiming to produce a $132 billion surplus in five years, Conrad's budget would increase the deficit from $212 billion in the current 2007 budget year to $249 billion in 2008.

Republicans have dubbed Conrad's plan a ``Wizard of Oz'' budget, saying it produces big increases in federal revenue as if by magic.

``It's going to take brains, courage and heart,'' Conrad retorted Thursday.

With cooperation among Democrats and Republicans in short supply on difficult budget issues, Conrad took a pass on trying to tackle the long-term fiscal debacle facing Social Security and Medicare, the federal retirement programs that will be swamped by the upcoming retirement of the baby boom generation.

Conrad's budget plan assumes Bush's tax cuts expire in 2010 as under current law _ unless lawmakers come up with more than $400 billion in additional revenues.

And it assumes lawmakers will pass big revenue increases to finance changes to the alternative minimum tax that promise to be almost equally as expensive.

The pending expiration of Bush's tax cuts is a product of an obscure Senate rule governing debate on Bush's 2001 and 2003 tax cuts.

Bush frequently calls for his tax cuts to be made permanent, but Republicans have never seriously tried to renew them.

Conrad assumes those decisions will be left to the next Congress and whoever is elected to succeed Bush.

``That's just political reality,'' Conrad said.

Republicans say Conrad is being far too optimistic in claiming easy revenues on paper from shutting down offshore tax havens and improving IRS tax collections _ while downplaying all-but-inevitable increases in tax rates. Grassley said such measures could probably cover just 5 percent of the cost of renewing the Bush tax cuts and curbing the alternative minimum tax.

For now, the Senate Democratic plan seems aimed chiefly at getting Congress' arcane budget process back on track after years of off-and-on success. Republicans failed to complete their budget work last year, resulting in a messy $464 billion catchall spending bill that passed last month.

The annual congressional budget resolution is a nonbinding document that sets guidelines for subsequent legislation. Its most important feature often is to impose a ``cap'' on the 12 annual spending bills produced by the appropriations committees.

In that regard, the Democratic plan is far more generous to non-defense appropriated programs _ including education, Amtrak, grants to state and local governments and law enforcement agencies _ than is Bush's budget plan, rewarding them with an $18 billion increase next year as opposed to the less than $4 billion boost Bush recommended.

The move appears to set up a clash this September with Bush, who has yet to veto a single appropriations bill, but who seems eager to get started.

On the ticklish issue of Medicare, the Democratic plan would pare $15 billion from payments to private insurance companies providing Medicare coverage.

Democrats rejected a move by GOP Sen. John Ensign of Nevada to add a Bush budget proposal to impose larger premiums on higher-income participants in the Medicare prescription drug program.

Democrats also rejected a GOP move to require 60 votes in the 100-member Senate to raise income tax rates.

The $15 billion in Medicare cuts assumed under Conrad's blueprint would be used to increase the number of children in low-income families receiving health insurance through the popular State Children's Health Insurance Program.

On taxes, this year's debate appears likely to be limited to easing the pinch of the alternative minimum tax on middle class taxpayers.