House GOP Passes Cuts, Barely

House Republican leaders eked out an important budget victory early today, only hours after suffering an embarrassing defeat on a major spending bill.

After weeks of turmoil within its own ranks, the House’s GOP majority passed a far-reaching bill to reduce the federal deficit by cutting benefit programs, such as Medicaid and food stamps, by about $50 billion over the next five years. The tally was 217 to 215, with no Democrats supporting the measure.

“This bill shows our resolve to ensure that taxpayer dollars are accountable and fiscally responsible,” House Speaker J. Dennis Hastert (R-Ill.) said.

The Senate, which already has passed a very different deficit-reduction bill, early today approved $60 billion in tax cuts. That bill would hit major oil companies with $4 billion in higher taxes and omit one of President Bush’s favorite tax cuts: an extension of low rates for investment income.

House Republican leaders, who have prided themselves on party discipline, suffered a rare defeat on a spending bill Thursday, when 22 of the GOP rank and file joined all Democrats in voting against a measure funding health, education and labor programs. It was the first time since Republicans took control of the chamber a decade ago that the House had rejected a House-Senate compromise spending bill, congressional staffers said.

“The Republicans have chosen a strategy of passing legislation with votes only from their side of the aisle, with an eye toward making legislation as ideologically pure as possible,” said Rep. David R. Obey (D-Wis.). “Today’s vote is a consequence of their refusing to walk across the aisle.”

The GOP leadership’s struggles came on some of the first major actions the House has taken since Rep. Tom DeLay (R-Texas), known for controlling his party’s members and moving controversial measures to passage, was forced to give up his post as majority leader after being indicted in Texas on money-laundering charges.

After the spending bill defeat, GOP leaders recessed the House for more than five hours in an effort to overcome divisions and pass the spending-cut bill.

It finally passed after Republican leaders softened some of the bill’s cuts to attract moderate votes.

For example, they changed the home-equity threshold that would deny nursing-home benefits to Medicaid recipients from $500,000 to $750,000 and restored certain Medicaid co-payments to $3 per doctor’s visit from the $5 originally proposed. Rep. Sherwood Boehlert (R-N.Y.) said moderates also won an assurance that the final bill would include increased home-heating assistance for low-income households.

Even so, the bill faces hard going in negotiations with the Senate, whose version includes no reductions in direct services to low-income Medicaid beneficiaries. The negotiations are likely to test Bush’s ability to work his will in Congress when his approval ratings are at an all-time low.

With the federal budget deficit last year at $319 billion, Rep. Mike Pence (R-Ind.), a leader of House conservatives, called the spending cuts an “important first step toward restoring fiscal discipline.” He said that although the savings would represent a mere scratch in a $2.5-trillion budget, “some of us have been itching for a long time.”

One provision of the House bill would split the nine-state 9th Circuit Court of Appeals into two, long a goal of conservatives who have regarded the San Francisco-based bench as too liberal. Another provision includes controversial mining law changes that would permit the sale of public lands in the West for private development. Neither provision is in the Senate bill.

The Senate’s $35-billion budget-cutting bill would authorize drilling in the Arctic National Wildlife Refuge, a provision that was dropped from the House bill because of opposition from moderate Republicans. Proponents of the energy exploration have vowed to step up their efforts to persuade House and Senate negotiators to include the drilling authorization in a final budget bill, which is immune to the kind of filibusters that have blocked the energy drilling, while drilling foes have vowed to fight just as hard to keep it out.

The Senate’s tax-cut bill, costing $60 billion over five years, also differs substantially from a $57-billion tax-cut measure expected to come before the House today. The Senate bill passed 64-33, with Sen. Dianne Feinstein (D-Calif.) voting for it and Sen. Barbara Boxer (D-Calif.) opposed.

The Senate bill would shield millions of mostly upper-middle-income taxpayers from the alternative minimum tax, which was created in 1969 to prevent the very wealthy from sheltering income from the IRS but has ensnared many who are less well-to-do.

The big-ticket item in the House bill, by contrast, would extend low tax rates for capital gains and dividend income, now scheduled to expire after 2008, for two more years.

Senate GOP leaders said they would push to extend the capital gains and dividend tax cuts -- a centerpiece of Bush’s 2003 tax agenda -- during negotiations with the House on a final bill.

In a memo to the Senate, the White House budget office called those extensions “necessary to provide certainty for investors and business and are essential to sustaining long-term economic growth.”

The Senate’s Republican majority defeated a Democrat-led effort to impose a windfall-profit tax on the oil industry and then a bipartisan move to rescind tax breaks available to big oil companies. Boxer and Feinstein supported the measures targeting the oil industry’s record profits.

Republicans objected that the windfall-profit tax would discourage energy production. “Without energy, we don’t have any economy,” said Sen. Craig Thomas (R-Wyo.).

Still, the bill includes an accounting change that would cost major oil companies about $4 billion over the next five years, though a number of Republicans said they expected the provision to be stripped out of a final bill during House-Senate negotiations. The White House also opposed the provision, saying it would change a “long-accepted accounting practice.”

Earlier Thursday, in a 224-209 vote, the House rejected a compromise with the Senate on the annual spending for the Health and Human Services, Labor and Education departments. The GOP opposition included conservatives who wanted deeper cuts and moderates who found the cuts too deep.

In the latter category, Rep. Jim Leach of Iowa said the bill fell short on “economic balance and social justice.” A number of lawmakers from both parties also objected that the bill did not include projects for their districts. “We may have underestimated our members’ concerns about that,” Rep. Jack Kingston (R-Ga.) said.

The defeated bill would have eliminated 20 programs, most of them education programs, and held many others at or slightly below the last year’s level. Altogether, it would have made available $142.5 billion, compared with the $142.7 billion appropriated last year.

But Obey, who as the Appropriations Committee’s top Democrat led the opposition Thursday, said it represented a 5% to 6% cut after taking inflation and population growth into account.

“For Republicans,” he said, “the name of the game is to cut wherever they can to give billions of dollars to the rich in tax cuts.”