Democrats banking on empty reserves

Democrats are pushing a budget through Congress that appears to make room for more spending for some of their favorite domestic programs -- without cutting defense, raising taxes or deepening the deficit.

It sounds too good to be true. Republicans say it is.

The House and Senate versions of the budget depend on “reserve funds” to pay for additional spending for such programs as children’s healthcare and farm aid. With the reserve funds, Congress can avoid the hard choices that drawing up any budget, whether it’s for a household or the federal government, usually entails.

There’s only one catch: The reserve funds are empty.

If Congress wants to fill them, it will have to do what it has tried to avoid: cut from defense or domestic programs, raise taxes or borrow the money and drive up the deficit.

“This is a balanced budget with balanced priorities,” House Budget Committee Chairman John M. Spratt Jr. (D-S.C.) said after the committee passed his version of the 2008 budget last week. “It shows that Democrats are fiscally responsible.”

But Rep. Paul D. Ryan of Wisconsin, the top Republican on the House Budget Committee, called the reserve funds “totally meaningless.”

Reserve funds make for good public relations, he said, because they appear to let Congress enjoy the pleasure of spending for popular programs without enduring the pain of cutting elsewhere or raising taxes. But in reality, he said, the empty reserve funds have no effect on spending or revenue.

The Senate, acting first on the budget for the fiscal year that begins Oct. 1, approved a budget that would gradually shrink the deficit and lead to a small surplus in 2012. Its budget, which the majority Democrats adopted on a near-party line vote of 52 to 47, includes about two dozen reserve funds that could hold an unlimited amount of money.

The House, which plans a floor vote on its version of the budget this week, will start work with a budget approved by its Budget Committee last week on a strict party-line vote of 22 to 17.

By itself, the budget serves as a guide to the spending and tax legislation that Congress passes later.

Under the Democrats’ “pay as you go” rules, a bill is subject to objections that it is out of order if it adds to federal spending or cuts revenue by a greater amount than is done by the budget. Although only a majority of House members or 60 of the 100 senators can overrule such a point of order, the requirement of going on record in favor of boosting the deficit is thought to act as a deterrent.

This year offers Democrats their first chance as the majority party in Congress to put their own stamp on one of President Bush’s budgets.

Their situation is precarious. They are working from a previous year’s deficit of $248 billion; when Bush took office six years ago, he started from a surplus of $236 billion.

In this atmosphere, the Democrats do not want to appear fiscally reckless. It’s good policy at a time when the retiring baby boom generation will soon put enormous pressure on the budget. And Democrats also believe it’s good politics.

Some Republicans had other ideas. Sen. Craig Thomas of Wyoming, who voted to eliminate all reserve funds from the budget, called them “a blank check signed by the American taxpayer. There is no end to what can be spent.”

Senate Budget Committee Chairman Kent Conrad (D-N.D.) replied, “There are no blank checks here.” He explained that other committees would still have to find ways to balance spending and revenue.

Thomas’ amendment was voted down, 67 to 29.

Fiscal experts are divided on the likely effect of the reserve funds. Brian M. Riedl, a budget analyst with the conservative Heritage Foundation, warned that they “could be used to raise taxes by hundreds of billions.”

But four nonpartisan budget watchdog organizations, including the Committee for a Responsible Federal Budget and the Concord Coalition, issued a statement supporting reserve funds as a step toward fiscal responsibility.

Robert L. Bixby, executive director of the Concord Coalition, called them a “very clever and useful way” of tamping down pent-up demand for more spending. “It’s a way to let off some steam without breaking the bank,” he said.

Bixby compared the spending programs financed by reserve funds to standby passengers for an airline flight: “They have to wait for a seat on the plane.”

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joel.havemann@latimes.com