House, Senate GOP Budgeters Split on Tax Cuts

The House Budget Committee is splitting with the Senate over the need to pay for tax cuts, presaging an election-year fight over procedural restrictions that could hinder President Bush's quest for more tax reductions.

The Republican-run budget panel planned to meet Wednesday to approve a bill requiring lawmakers to find spending cuts to pay for any boosts in benefit programs like Social Security (search) — but not for tax cuts. That follows the strong wishes of the White House and Congress' GOP leadership.

The committee was also expected to adopt a $2.41 trillion budget for 2005. The fiscal outline envisions lower spending, smaller tax reductions and faster deficit reduction (search) than Bush has proposed, a testament to GOP worries over political fallout from soaring federal shortfalls.

The budget, crafted by panel Chairman Jim Nussle, R-Iowa, would hold most domestic programs to the same levels as last year and give Bush the boosts he wants for defense and domestic security. It would also allow $138 billion in five-year tax cuts while claiming to halve this year's expected record $477 billion deficit in four years, a year quicker than Bush proposed.

The budget panel's meeting was a continuation from last week, when it failed to finish its work after committee Republicans demanded legislation controlling spending. Nussle spent the ensuing days consulting with House GOP leaders and figuring out what he had the votes to do.

The House bill's exemption of tax cuts from required, offsetting savings is in contrast to the GOP-led Senate. There, Democrats and four moderate Republicans prevailed last week in voting to require budget savings to pay for both benefit increases and tax reductions.

"Taxes and tax cuts pay for themselves" by stimulating the economy, Nussle told reporters Tuesday. "You don't have to, quote unquote, pay for them."

The move to require budget savings was prompted by expectations that this year's deficit will reach an unprecedented half trillion dollars, just three years after huge surpluses were projected indefinitely. Many Republicans worry that could be a liability with voters come November's presidential and congressional elections.

The dispute is crucial because Bush has proposed $1.3 trillion worth of tax reductions over the next decade, mostly to keep tax cuts enacted in 2001 and 2003 from expiring. The cuts are among his paramount domestic priorities, but it seems unlikely lawmakers would be able to find enough spending cuts in the budget to pay for them.

With such high stakes involved, the fate of the effort to require budget savings for spending increases or tax cuts is uncertain.

The prospects for House passage are unclear because some Republicans from other committees object to intrusion on their jurisdiction. Other Republicans say Nussle's plan does not go far enough.

Rep. Gil Gutknecht, R-Minn., a member of the budget panel, said he wanted future tax cuts — beyond the extension of the expiring ones — to be subject to the requirement for savings because the government will need revenue.

It is also unclear that the House and Senate will ever be able to resolve their differences over whether tax cuts should be exempted.

The Senate measure would let tax cuts or spending increases go unpaid for if 60 of the 100 senators vote accordingly.

Under the House plan, benefit programs would be automatically cut across-the-board if increases for those programs were enacted but not paid for.

The House bill also sets gradually growing annual spending caps, through 2009, on the one-third of the budget that covers agency expenditures, spending Congress must approve every year.