President George W. Bush sent his $2.9 trillion budget to Congress this morning, kicking off widespread debate in both the House and Senate. This is the first time during his presidency that Bush has delivered a budget to a Democrat-controlled Congress. Considering Democrats have made it clear that they have a different set of priorities, what kinds of challenges lie ahead?
According to CNBC's "Power Lunch," the Iraq War and the Alternative Minimum Tax will emerge as two key issues.
One of big differences, will be the way in which spending for the Iraq war is budgeted. In past years, spending has been done outside the budget in emergency spending appropriations bills.
“This time they’re trying to factor the Iraq war into the actual budget of the government of the United States. And it’s a big number, and it’s squishing out a lot of other numbers, and a lot of other spending priorities," explained BusinessWeek Washington correspondent, Eamon Javers. “That’s going to cause a lot of angst on Capitol Hill.”
Bush was seeking a Pentagon budget of $624.6 billion for 2008, more than one-fifth of the total budget, up from $600.3 billion in 2007.
For the first time, the Pentagon included details for the upcoming budget year on how much the Iraq war would cost — an estimated $141.7 billion for fighting in Iraq and Afghanistan, as well as the cost of repairing and replacing equipment lost in combat.
"This budget assumes war spending drops dramatically in the out years," added Nell Henderson, economics reporter for the Washington Post. In only a few years, this budget suggests spending on the Iraq War will drop to nothing. "No one thinks spending is going to $0 that fast."
Alternative Minimum Tax
Already the Alternative Minimum Tax is also emerging as a key sticking point between the GOP and Democrats. “The president’s budget includes what [the White House] calls a fix for the Alternative Minimum Tax,” added Henderson. The budget, however, only addresses that issue for 2008 and not after that. “And Democrats have said they want to fix that,” Henderson says.
“Charlie Rangel, the head of the Ways and Means Committee, is saying AMT is his priority this year,” added BusinessWeek's Javers.
“You’re starting to hear some grumbling on Capitol Hill from people talking about the Bush tax cuts," he explained, "saying even if we extend the cuts it doesn’t really have an impact on the taxpayers because the AMT is going to come back in future years and eat up all those tax cuts we’ve given people. So it’s a wash unless we do something about the AMT.”