Budget Wins Final Approval From Senate

In a major milestone for President Bush’s quest to reshape federal fiscal policy, the Senate gave final congressional approval Thursday to a federal budget that authorizes a sweeping tax cut, a major reduction in national debt and a slowdown in government spending.

The Senate vote was 53 to 47, with five Democrats crossing party lines to provide crucial support for the budget resolution. Two Republicans voted against it.

Congress will now focus on how to implement the tax cuts and spending provisions outlined broadly in the budget resolution.

Although the Senate vote fell short of a resounding show of bipartisanship, it was a striking emblem of how much the Bush presidency--coupled with GOP control of Congress--has transformed the terms of the budget debate.

The resolution, which passed the House on Wednesday, clears the way for a $1.35-trillion tax cut over 11 years--relief of a magnitude unthinkable just a year ago, when President Clinton vetoed a series of far smaller GOP tax breaks. Although Bush had sought a bigger tax cut of $1.6 trillion over 10 years, Republicans hailed this week’s action as a watershed victory for the new president.

“You didn’t get everything you want, Mr. President,” said Sen. Pete V. Domenici (R-N.M.), chairman of the Budget Committee. “[But] you have made us change direction. You have moved us in the direction of giving back taxes to the American people rather than giving them the last cut of the deck.”

White House spokesman Ari Fleischer said the congressional votes sent a message that “tax relief is on the way.”

The budget resolution passed the Senate with less Democratic support than emerged for an earlier proposal to provide a similar tax cut but allow significantly more spending. Among the Democrats who switched and voted against the final version was Dianne Feinstein (D-Calif.), who said the current plan does not include enough funding for education and other domestic programs.

Even some of the Democrats who voted for the final budget seemed to have qualms about its spending provisions.

“This document is important as an outline of our priorities,” said Sen. John B. Breaux (D-La.), a key centrist who voted for the budget. “But it is written on paper. It is not written in concrete.”

With the budget in place, House and Senate committees can begin drafting the 13 annual appropriation bills, which set spending for particular agencies and programs--a process that will stretch through the summer and fall.

GOP leaders plan to move far more quickly on the tax cut. Their ambitious hope is to get the bill to the White House by Memorial Day, which could deliver relief to taxpayers as early as this summer.

The Senate Finance Committee is expected to meet next week to write legislation that spells out the tax cut’s specifics. Sen. Charles E. Grassley (R-Iowa), the committee’s chairman, has been working with the panel’s ranking Democrat, Max Baucus of Montana, in hopes of producing a bipartisan proposal.

But when Baucus met with fellow Democrats to discuss a draft of the proposal Thursday, many voiced concerns that the measure was too skewed to the wealthy--and that Baucus was moving too quickly to close a deal with Grassley.

The bill is expected to encompass the four major elements of the Bush tax agenda: cutting income tax rates, repealing the estate tax, reducing the tax bill for married couples and increasing the tax credit for families with children. But each element will have to be scaled back to squeeze into Congress’ smaller $1.35-trillion tax cut target.

Grassley is considering changes that would drop the top income tax rate from 39.6% to 36%--not the 33% top rate Bush wanted. He also would phase in the rate cuts and repeal of the estate tax over a longer period than Bush proposed and is considering a smaller tax cut for married couples than some senators want.

Additionally, the panel will grapple with how to provide tax relief that affects people as early as this summer--the budget stipulates that $100 billion in tax relief occur this year and in 2002 to stimulate the economy. The most likely proposal will be a retroactive cut in income tax rates--which will be reflected in reduced tax withholding in taxpayers’ paychecks after the bill becomes law.

The budget resolution reflects a broad and relatively recent consensus that much of the emerging surplus--estimated to total $5.6 trillion over 10 years--should be used to pay down the national debt, the legacy of years of deficit spending. The budget calls for reducing the publicly held national debt by $2.4 trillion over 10 years, leaving it at $818 billion in 2011.

The resolution also sets a target of $661 billion for discretionary spending--the part of the budget controlled by the annual appropriation process, which includes the Pentagon and most domestic programs other than automatic benefit programs, such as Medicare and Social Security. That is up about 4% from the amount provided for this year, roughly the amount Bush requested. But because Congress is expected to provide bigger increases for defense, education, biomedical research and selected other areas, the spending ceiling is expected to force cuts or slower growth in other programs.

And Congress is expected to make an exception to the spending ceiling for a big infusion of defense funds after the Pentagon completes its review of defense needs.

In Thursday’s Senate vote, the two GOP votes against the budget resolution came from liberal Sens. James M. Jeffords of Vermont and Lincoln Chafee of Rhode Island.

Democrats who joined Breaux in voting for the budget were Baucus, Zell Miller and Max Cleland of Georgia, and Ben Nelson of Nebraska.

All come from states Bush won in the 2000 election; Baucus and Cleland are facing potentially tough reelection battles in 2002.

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Budget Process: What’s Next? The 2002 budget resolution sets targets for government spending and revenue. The House and Senate now must craft and pass specific measures to fill in the details.

Tax cuts:

* Senate Finance Committee has until May 18 to pass a bill implementing a $1.35-trillion, 11-year tax cut; Senate approval expected soon thereafter.

* The House has already passed bills incorporating parts of the Bush tax cut, such as slashing income tax rates and repealing the estate tax.

* The two chambers will have to resolve differences between their tax cut bills.

* Republican leaders hope to send a final tax cut bill to the White House by Memorial Day; others predict it may not happen until the early summer.

Spending:

* The budget resolution allocates $661 billion for discretionary spending on defense and most domestic programs other than Social Security and Medicare. House and Senate committees will begin deciding how to allocate that money as they draft the 13 annual appropriation bills that set spending levels for individual federal agencies and programs.

* The deadline for passing these bills is Oct. 1, the beginning of the 2002 fiscal year. Disputes over these bills often extend the congressional session a few weeks.

Source: Los Angeles Times