The Budget’s Bumpy Road

A federal budget deal that pleased neither the White House nor congressional moderates has--surprise, surprise--run into major problems. The budget guidelines, the limits on spending and taxing that Congress is supposed to follow but usually doesn’t, got delayed by last-minute haggling over education spending and procedural pitfalls.

For President Bush, the measure is crucial not so much because it reflects his fiscal priorities but because it would safeguard the $1.35-trillion tax cut deal he struck last week with congressional negotiators. The tough part for fiscal moderates of both parties will be to write a tax bill that distributes more of the benefits to low-and middle-income taxpayers and keeps the total within agreed limits.

In the evenly divided Senate, every vote counts and procedure is king. Already, an unfavorable procedural ruling by the Senate parliamentarian angered the Senate Republican leadership and cost him his job.

But as difficult as it is to cut a deal on a budget resolution, writing the actual spending measures and the tax bill to fit within the agreed $1.35-trillion limit will be even tougher.

Last Wednesday, a day after Bush announced the tax compromise, the House passed a $52-billion tax cut to stimulate retirement savings, a popular and desirable incentive but one not included in Bush’s tax package. Waiting in the wings is a range of additional tax cuts that, added up, may bust even Bush’s $1.6-trillion limit. There are many ways to skin the tax cat, and one of them is to tack additional cuts to measures that the Democrats would be reluctant to oppose, such as the minimum-wage increase.

Democrats and centrist Republicans, meanwhile, are hunting for ways to shift more tax-cut benefits to low-and middle-income taxpayers. Bush’s proposal for the repeal of the estate tax should be scrapped first, and the limits on the size of taxable estates should merely be raised to protect vulnerable farmers and small businesses.

At the same time, moderates will have to guard against cuts that start out small but balloon as the years go by. For instance, according to independent estimates, Bush’s proposed $1.6-trillion 10-year package would have ballooned to nearly $5 trillion over the second 10-year period.

In writing the tax bill, Congress should also try to simplify the 5-million-word tax code, following the recent recommendations of its own bipartisan Joint Taxation Committee. Taken together, these are very tall orders.

The budget resolution should, despite its difficulties, be approved later this week. It will mark just the beginning of a battle to achieve realistic government spending and a fiscally prudent, equitable tax cut bill.