House Committee Approves $2.4-Trillion Budget for ’05

The House Budget Committee on Wednesday approved a $2.41-trillion budget for the 2005 fiscal year and separate legislation that would impose caps on spending.

In each case, the vote was 24 Republicans in favor and 19 Democrats opposed. The budget bill is scheduled for consideration by the full House next Wednesday.

The panel’s actions set the stage for what will probably be contentious negotiations between the House and the Senate, both controlled by Republicans, to reconcile differences in their 2005 budget bills. Some conservative and moderate Republicans in both chambers have recently expressed growing unease with record deficits, which are expected to rise to about $477 billion this year.

President Bush has asked Congress to make permanent the tax cuts passed in 2001 and 2003 and estimated to reduce revenue by $1.3 trillion over the next decade. But both the House and the Senate want only a few of the tax cuts extended -- the ones easing the so-called “marriage penalty,” expanding the 10% income-tax bracket and increasing the child tax credit to $1,000 per child.

The Democrats on the committee argued that if spending is capped, restrictions should also be placed on new tax cuts. Last week in the Senate, four Republicans crossed party lines to pass a “pay-as-you-go” amendment to the budget requiring 60 votes to enact new tax cuts. But there was no such show of bipartisanship on the House Budget Committee, which refused to follow the Senate’s lead and make it tougher to enact new tax cuts.

Democratic members praised the Senate’s action while denouncing Republicans for making what Rep. Ron Kind (D-Wis.) said was “a veiled cynical attempt ... to pretend you’re being fiscally responsible without making the hard choices.”

Rep. Jim Nussle (R-Iowa), the committee chairman, rejected suggestions that any new tax cuts should have corresponding spending cuts and that the earlier tax cuts -- the centerpiece of Bush’s domestic agenda -- worsened budget deficits.

“The real challenge to the deficit, long-term, is controlling spending,” Nussle said. “We don’t believe that you should have to ‘pay for’ tax cuts.”

Last week, Nussle agreed to introduce some sort of spending cap after a group of Republican conservatives and moderates on the committee insisted that the budget be accompanied by enforcement measures. The agreement on spending caps was reached after days of negotiations among committee members and with the House Republican leadership.

The budget approved by the House committee would hold discretionary spending to $819 billion next year. Included in that amount is $421 billion Bush sought for defense spending and $34 billion for homeland security. The budget holds all other discretionary spending to 2004 levels.

It also extends the 2001 and 2003 tax cuts, at a cost of $137 billion -- $50 billion more than the Senate budget. And it projects that this year’s expected $477-billion budget deficit will be cut in half by 2008, based largely on projected economic growth that will raise federal revenue. The other legislation voted on Wednesday would impose restrictions on spending for entitlement increases through 2009 and set annual spending caps that would grow steadily through 2009 on the one-third of the budget that Congress must approve each year for spending by federal agencies.

Nussle announced during the committee hearing that the White House welcomed the spending restrictions and caps. He said he was unsure, however, when he would bring that proposal to the House floor for a vote.

“The most important thing we have to do today is to pass a budget, because if we don’t have a budget, we don’t have anything to enforce,” Nussle said.

Independent budget watchdog groups said the enforcement measures pursued in the Senate and the House were signs that Congress is beginning to change course after years of passing tax cuts without corresponding spending cuts.

“It is good that they’ve recognized the problem and that deficit reduction is an explicit policy goal; that’s an important thing,” said Robert L. Bixby, executive director of the nonpartisan Concord Coalition in Arlington, Va.

Despite that, Bixby said, “there aren’t a lot of plans to really cut spending or increase taxes” on Capitol Hill. Republicans, he said, “still want to cut taxes and increase spending and maybe hold the line in some areas. They hope the economy gets going enough to cut the deficit. They’re leaning heavily on the economy.”

Republicans contend that tax cuts stimulate the economy and add to government revenue.

In a bipartisan effort to reduce deficits in the 1990s, Congress enacted pay-as-you-go measures that applied to both spending and tax cuts. Although Congress often got around the measures by allowing “emergency” spending, exempted from the restrictions, they were seen as largely successful in controlling spending -- but they were allowed to expire in 2002.

Congressional efforts this year to control spending mark the beginning of a return to fiscal restraint, said Robert D. Reischauer, president of the Urban Institute and director of the Congressional Budget Office from 1989 to 1995.

“If you had asked me Jan. 5, I never would have expected there to be this much concern about the deficit,” Reischauer said. So Congress’ expression of concern, he said, “represents progress.”

Still, he noted, “this is a multi-year process. Congress doesn’t turn on a dime.”

The Senate and the House will eventually have to iron out their differences or abandon the effort to pass a budget for this year. Congressional budgets are largely nonbinding documents that set broad spending and revenue guidelines.