GOP’s Budget Deal Cuts Programs, and Taxes

Congress passed a 2006 budget blueprint Thursday, drafted by Republicans, that calls for new belt-tightening in major domestic programs, even as it allows $106 billion more in tax cuts and leaves a $382-billion deficit.

The measure also paves the way for adoption this year of legislation to expand oil and gas drilling in Alaska’s Arctic National Wildlife Refuge, a top White House priority.

The package -- approved 214 to 211 by the House and 52 to 47 by the Senate on Thursday night -- calls for $40 billion in savings in Medicaid, farm programs and other fast-growing entitlement programs over the next five years. Those votes came after House and Senate negotiators struck an agreement earlier in the day.

California’s senators, both Democrats, opposed the measure.

The budget savings fall short of the $69 billion that President Bush initially sought. Still, the budget agreement marks the first time since 1997 that Congress has taken even a modest step toward slowing the growth of government entitlements.

The budget -- a compromise between versions passed by the House and Senate -- is a victory for Republican leaders, who were hoping to avoid repeating the embarrassment they suffered last year, when the two chambers could not reach agreement on a budget.

“Is this a perfect budget? Of course not,” said House Budget Committee Chairman Jim Nussle (R-Iowa). “Having a plan is better than not having a plan.”

The budget resolution is a nonbinding blueprint that does not require Bush’s signature. But it sets spending ceilings and revenue targets for tax and appropriations bills drafted later this year.

It also sets in motion a procedure that will allow the tax and spending cuts mandated by the budget to be considered in a special bill that is immune from filibusters in the Senate. The Alaskan oil-drilling initiative is expected to be part of that measure, enabling it to circumvent the filibusters that have blocked that signature piece of Bush’s energy policy in past years.

Negotiations over final terms of the budget were tricky because the House, where conservatives have been restive over the growth of government spending in recent years, insisted on tighter restrictions on domestic spending than the Senate wanted.

A point of particular controversy was Medicaid, the federal-state healthcare program for the poor. The House version of the budget called for slowing the growth of the program by $20 billion over five years. In the Senate, Republican Gordon H. Smith of Oregon led an effort to spare the program from cuts.

During negotiations on the compromise, Smith and others threatened to vote against the whole budget if they thought it went too far in squeezing Medicaid. He accepted the terms of the final compromise, which calls for $10 billion in Medicaid savings through 2010 but requires none of those savings to be made in 2006. Negotiators agreed to establish a task force to report by Sept. 1 on ways to slow the growth of the program.

That disappointed conservative House Republicans, but they acceded to Senate demands rather than risk a stalemate.

“While we would have liked to have a budget calling for less government and greater savings, this is a good start,” said Rep. Jeb Hensarling (R-Texas).

But the $10 billion in Medicaid savings was too much for many Democrats and liberal groups.

“It is unconscionable to balance the budget on the backs of our most vulnerable Americans, and that is exactly what the White House and congressional Republicans have decided to do,” said Sen. Hillary Rodham Clinton (D-N.Y.).

The spending cuts were particularly galling to Democrats because they were proposed in tandem with additional tax cuts.

The budget does not specify which taxes will be cut, but one likely option is to extend a set of tax cuts that are due to expire this year, including the federal deduction for state sales taxes.

Many lawmakers are also looking for ways to provide relief for middle-income taxpayers who are increasingly being hit by the alternative minimum tax, a levy that was originally designed to apply only to the wealthy.