House Passes Budget to Halve Deficit by 2009

By Mary Curtius

March 26, 2004 12 AM PT

Times Staff Writer

WASHINGTON — The House on Thursday passed a $2.4-trillion budget for the 2005 fiscal year that Republicans say will cut the deficit in half by 2009, extend some tax cuts and increase spending on defense and homeland security.

The House budget, like the Senate version passed this month, closely reflects President Bush’s wishes, although it calls for quicker reduction of the deficit -- expected to hit a record $477 billion this year -- and offers fewer tax cuts in the next five years than Bush sought.

Informal negotiations were under way between the two chambers to reconcile their budgets even before the House narrowly approved the bill, 215 to 212. The two sides are expected to clash over the House’s call for deeper tax cuts and its rejection of the Senate’s bipartisan decision to offset tax cuts with spending cuts or tax increases.

With the deficit an issue in the 2004 election, this year’s budget process shifted from the emphasis on cutting taxes that dominated the first years of the Bush administration to worries about mounting shortfalls and what Republicans described as out-of-control spending.

Congressional budgets are largely nonbinding, but they provide broad parameters for spending and revenue. In an election year, they also help define each party’s priorities for voters. Democrats offered three alternative budgets and said their plans would reduce the deficit faster, roll back tax cuts for the wealthiest Americans and spend more on domestic programs. All three plans were easily defeated by the Republican majority.

“Once again, as we do every year, we have two radically different visions for the future of America presented in the budget debate,” Speaker of the House J. Dennis Hastert (R-Ill.) said in wrapping up the debate. Republicans, he said, were determined to cut taxes and spending, while Democrats were determined to raise both.

But House Minority Leader Nancy Pelosi (D-San Francisco) accused Republicans, “for the fourth time in four years,” of seeking “to pass a budget that is nothing less than an assault on our national values.”

No Democrats voted for the budget, while 10 Republicans broke with their party to oppose it. The California delegation split along party lines, with all Republicans in favor and all Democrats against.

The Republican leaders in both chambers hope to have a compromise bill ready for a vote before April 15. Bush praised the House for its action and called on the House and the Senate “to reach agreement quickly.”

In his proposal for the 2005 fiscal year, which begins Oct. 1, Bush had asked that all the tax cuts enacted in 2001 and 2003 -- some of which are due to expire this year -- be made permanent, but both the House and the Senate versions offer less in that area than the president sought.

The Senate’s budget protects $81 billion worth of tax cuts from potential filibuster in the narrowly divided chamber. That means that three popular tax cuts scheduled to expire this year -- the increased child tax credit, the elimination of the so-called marriage penalty for couples and the expanded 10% tax bracket -- are likely to be easily extended for five more years.

The House budget includes $152.6 billion in tax cuts. About $138 billion of that would be protected procedurally, enough to extend the same tax cuts that the Senate wants to extend and also extend cuts in capital gains and dividend taxes. Bush had asked for $184 billion in tax cuts over five years.

Independent congressional watchdog groups have said that neither chamber’s proposal represents a serious effort to cut the deficit, because neither calls for deep spending cuts or proposes new ways to raise revenue. Both versions rely largely on continued economic growth and a virtual freeze in domestic spending outside homeland security to bring the deficit down to about $234 billion by 2009.

“They are starting from a high point [in budget deficits] and setting a very modest deficit reduction target,” said Robert L. Bixby, director of the Concord Coalition, a nonpartisan budget watchdog group in Arlington, Va. “And they are only achieving that reduction by assuming a level of spending restraint that hasn’t been in evidence in recent years.”

House Republican conservatives and moderates who wanted to see more cuts in spending threatened earlier this month to vote against the budget if the leadership did not agree to impose caps on mandatory and discretionary spending that was not related to defense. The leadership promised to bring up a separate bill imposing such caps later this year. They have set no date.

In two days of debate, there was plenty of political theater, complete with props ranging from colorful charts to the four walnut shells used by Rep. Jim McDermott (D-Wash.) to illustrate what he called the Republican “shell game” on spending. But there was little of the drama that marked last year’s budget fight, when the Republican leadership had to keep the vote open for nearly an hour -- and persuade a Democrat to join them -- to win a close vote. This year, GOP conservatives and moderates fell into line to pass the spending blueprint.

Democrats attacked the budget for shortchanging seniors, veterans, medical research, environmental programs and transportation.

GOP no longer stands for Grand Old Party, said Rep. Edward Markey (D-Mass.), but “Get Old People.” In an angry floor speech, he accused Republicans of slashing spending for medical research and Medicaid to give tax cuts to Americans in “the upper 2%” income brackets.

“Watch out, Grandma! Watch out, Grandpa!” Markey shouted on the House floor as he brandished a “Get Old People” sign. “Tax cuts for the wealthiest are sacrosanct!”

The Budget Committee chairman, Rep. Jim Nussle (R-Iowa), was unmoved. Dismissing Democratic allegations as ludicrous, he said the Republican budget preserved domestic spending levels while increasing funding for defense and homeland security. The Democrats’ only solution for cutting deficits is raising taxes, he said.

“Tax cuts didn’t cause the deficits,” Nussle said again and again. “It’s spending, it’s spending, it’s spending that gets us into deficit.”

With the economy now recovering from recession, Nussle said, “two things we cannot do ... kill the economy [with tax increases] or continue the increases in spending.”

Under the House plan, $418 billion -- 7% higher than the 2004 figure -- would go toward defense spending. In addition, the House budgeted $50 billion for expenses related to operations in Iraq and Afghanistan. The White House budget did not include money for operations in those countries.

The House version budgets $33 billion for homeland security -- more than 10% higher than the fiscal 2004 figure, but 0.5% less than the increase the president sought. Domestic programs other than homeland security would be held to $369 billion, the same as this year and $1.3 billion less than Bush sought.

The House also trimmed $4 billion from Bush’s $30-billion international affairs request. International hunger and poverty organizations have said they fear those cuts will be taken out of Bush’s Millennium Challenge Account, meant to spur political and economic reforms in Third World countries in exchange for aid, and out of efforts to combat AIDS.

(BEGIN TEXT OF INFOBOX)

Comparing the budgets

In the $2.41-trillion budget that the House passed Thursday, the deficit will be cut in half by 2009.

Bush plan

Totals $2.37 trillion with a $358 billion shortfall

Deficit Cut $477 billion to $258 billion by 2009

Tax cuts $181 billion over five years costing $1.3 trillion over 10 years

Senate plan

Totals $2.36 trillion with a $341 billion shortfall

Deficit Cut to $223 billion by 2007, $200 billion by 2009

Tax cuts $142 billion in five years, but only $81 billion in cuts likely enacted

House plan