U.S. News

Congress Approves $2.9 Trillion Budget Blueprint

Congress gave final approval on Thursday to a $2.9 trillion budget plan that promises big spending increases for education and health care and a federal surplus in five years.

The Senate's 52-40 vote probably sets up veto confrontations with President Bush over spending increases and the fate of many of his expiring tax cuts.

Shortly before the Senate vote, the House passed the measure by a 214-209 vote without a single Republican voting for it.

The nonbinding measure is not sent 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 blueprint is for the budget year that begins Oct. It also makes a statement about Democrats' differences with Bush and was seen as a critical test of Democrats' ability to govern.

The budget plan seeks to bolster domestic programs whose budgets the president has curbed. It also would let expire tax cuts that have greatly benefited upper-bracket taxpayers.

The measure would permit increases averaging 5% for domestic programs funded by the 12 annual appropriations bills. That includes education, community development grants, veterans' medical care and health insurance for children of the working poor.

Bush wanted to effectively freeze such programs and has pledged to veto spending bills that break his budget goals.

Democrats said their budget measure would put the government $41 billion in the black by 2012, after steady deficits since 2002. They said the measure also would reversing Bush's clampdown on domestic agencies' annual budgets passed by Congress.

"Our budget does more for veterans' health care, more for more for children's health care, and more for education," said House Budget Committee Chairman John Spratt Jr., D-S.C.

"This budget comes to balance in five years and runs a surplus of $41 billion in 2012. Contrast that with the president's budget, which remains always in deficit."

The Democratic plan endorses Bush's 11% increase in the Pentagon's budget and his $145 billion request for the wars in Iraq and Afghanistan next year.

Republicans criticized the Democratic plan as a major tax increase. They noted it projects a surplus in 2012 by assuming that tax cuts on income, stock dividends and capital gains expire as scheduled at the end of 2010.

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

Republicans had hoped for permanent tax cuts when GOP lawmakers fashioned them in 2001, but an obscure Senate rule prevented that. Republicans never held later votes to make permanent all the cuts, despite Bush's annual pleas.

Republicans faulted the Democratic plan over its spending increases and for failing to address looming shortfalls in benefit programs such as Medicare, Social Security and Medicaid.

"There is absolutely no attempt to address the entitlement crisis that we're facing -- the fact that our children and our children's' children are going to have to pay a cost which they simply will not be able to afford," said Sen. Judd Gregg of New Hampshire, top Republican on the Senate Budget Committee.

Added Rep. Paul Ryan, R-Wis., and the ranking Republican on the House Budget Committee: "Next year the baby boomers start retiring and we're not ready for them."

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 trying 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.