Budget Debate Rests on Fate of Bush’s Tax Cuts

Posted March 19, 2007 at 6:30pm

If you’ve had your fill of the “Democratic dove” versus “Republican hawk” fights that have dominated Capitol Hill in recent months, then you’ll be happy to know the parties will be shifting this week to another tried-and-true battle — the “tax and spend liberals” versus “budget-busting, tax-cut happy conservatives” — as both the House and Senate take up their long-term spending blueprints. [IMGCAP(1)]

Yes, the budget debate will be no less stereotypical than the disputes over Iraq War policy, but at least it will offer a slight change of pace for Congress-watchers as the new Democratic majority in both chambers takes its first stab at setting the nation’s fiscal priorities.

While the House Budget Committee is scheduled to mark up its budget draft Wednesday or Thursday, Senators likely will provide the most drama and hand-wringing over floor votes on amendments that likely will be used against them in campaign ads in 2008.

Senate Majority Leader Harry Reid (D-Nev.), however, is hoping to convince his troops to remain firm in the face of even the wiliest of Republican message amendments, considering that he doesn’t have a lot of room for error with only 50 active Democratic votes. (South Dakota Democratic Sen. Tim Johnson continues to recover from a December stroke.)

Democratic leaders “made clear that they don’t want us to go off the reservation” on budget votes, explained one Senate Democratic aide. “They want to make sure we stay as close to the [Senate Budget Committee-passed] resolution as possible. … And they don’t want a lot of amendments that could cause problems.”

Reid’s office tacitly confirmed that it is looking for as much party loyalty as possible. “From our standpoint, the resolution that came out of committee not only restores fiscal discipline, but it puts the needs of middle- and working-class Americans first. And we want to ensure that any budget that passes the Senate reflects those priorities,” said Reid spokesman Rodell Mollineau.

Still, even Senate Budget Chairman Kent Conrad (D-N.D.) wouldn’t go so far as to guarantee Democratic unity on his budget last week, despite obvious sweeteners that make sure defense is fully funded while including $18 billion more than President Bush’s domestic discretionary request for increases in education, health care and veterans care.

“We certainly are hopeful about that and optimistic about that,” Conrad said of Democrats voting down GOP amendments and for his budget. “But it’s extremely difficult when you’ve got to hold every vote.”

Republicans are planning a traditional tax increase scare-tactic assault on Conrad’s budget because it assumes — as does the nonpartisan Congressional Budget Office — that the president’s tax cuts from 2001 and 2003 will expire in 2011, resulting in more than $900 billion in additional revenues that Conrad used to help balance his budget by 2012.

“He could have gotten a balanced bill without raising revenues by $900 billion and without increasing spending,” complained Senate Budget ranking member Judd Gregg (R-N.H.).

Key to the Republicans’ argument is the fact that Conrad’s budget punts the issue of extending Bush’s tax increases until after the 2008 presidential election — a move those in the GOP said was suspicious.

“If you’re going to cut taxes, you clearly would talk about that now,” said Ryan Loskarn, spokesman for the Senate Republican Conference. “But if your plan is to raise taxes, you clearly would wait until after the election to bring that up.”

Conrad has said that the gambit will create an incentive for a full-scale tax reform debate in Congress following the 2008 elections, and he noted that the Bush tax cuts can be renewed if they are paid for with cuts or tax increases elsewhere.

“We believe there doesn’t need to be a tax increase at all under our budget,” Conrad said last week.

But Republicans plan to hold Democrats’ feet to the fire with potentially tough votes on specific elements of Bush’s tax cuts that would not be renewed, such as the increase in the child tax credit, the credit for teacher supplies and the rate reduction for couples to avoid what commonly is called the “marriage penalty.”

“I think we’re actually going to have a good week,” Loskarn said.

Indeed, one Democratic fence-sitter, Sen. Ben Nelson (Neb.), likely will have a tough time voting against amendments that call for those tax cuts to be extended.

“He’s voted in the past to support tax cuts, and I don’t see him changing that pattern,” said Nelson spokesman David DiMartino. “If tax cuts come up in the debate, my guess is he’ll vote for them.”

Of course, Reid may be able to afford losing Nelson as long as centrist Republicans such as Sen. Olympia Snowe (Maine) join with Democrats on many of those votes, and it appears there’s a good chance they’ll get her support.

Though Snowe will not make any commitment to supporting the Democratic budget or any amendments prior to the start of debate, her spokesman, David Snepp, said Snowe’s concerns about the blueprint hardly are the kind that signal a desire for more tax cuts. Snepp indicated that Snowe might be interested in increasing the allotted set-asides for poor children’s health care and for home heating assistance.

Also on the plus side for Reid, both Snowe and Nelson are big fans of “pay as you go” rules that require any new mandatory spending or tax cuts to be offset or else face a 60-vote point of order in the chamber. Conrad included that budget enforcement provision, which Democrats made a centerpiece of their new majority agenda, in his budget.

Meanwhile, House Democrats likely will face many of the same criticisms from Republicans, considering that House Budget Chairman John Spratt’s (D-S.C.) proposal likely will be “very close to Conrad’s budget,” said Spratt spokesman Chuck Fant.

Still, it’s unclear to what extent Spratt will have to woo conservative Blue Dog Democrats, who craft their own balanced budget every year as an alternative.

Fant said “things are looking pretty good” in terms of Democratic Caucus support for the budget but that Spratt is still “running some draft budgets up the flag pole” to make sure conservatives and liberals alike are comfortable with the final product.