Senate Passes Budget With Medicaid Intact

A Senate-passed $2.6 trillion budget that ignores President Bush's proposal to wring savings from Medicaid (search) is just one step in Congress' protracted effort to make fiscal decisions for next year, White House spokesman Scott McClellan said Friday.

McClellan made his remark the morning after the House and Senate approved dueling budgets with divergent appetites for Bush's recipe of curbing rampant deficits by reining benefit programs for the first time since 1997. The House's outline endorsed even deeper reductions in Medicaid and other programs than Bush proposed.

"Congress is still working on an agreement for a budget framework," McClellan told reporters traveling with Bush on Air Force One to Florida. "There's still a legislative process to go."

The House budget (search) would cull up to $20 billion from planned Medicaid spending over the next five years, a 1 percent reduction that would more than double what Bush's savings are worth. Overall, it seeks $69 billion in reductions from agriculture, student loans and other benefits, $18 billion more than Bush.

But in the Senate, rebellious moderate Republicans joined Democrats in voting 52-48 to eliminate all $14 billion in Medicaid savings that chamber's budget had proposed. Senators also voted to roll back Bush's plans to cut billions of dollars from education, community development, water projects and other programs.

"It is not the bill I would have chosen if Id had a magic wand," said Senate Budget Committee Chairman Judd Gregg, R-N.H. "But this is the middle of the process and I hope it will improve."

Highlighting unease by Republicans in both chambers, the House plan was approved by 218-214, while the Senate's squeaked through on a 51-49 vote.

With an 11th-hour amendment nearly doubling the size of the Senate budget's tax cuts, four moderate Republicans voted "no" and Vice President Dick Cheney was on hand in case he was needed to break a tie vote.

Senators also voted to restore money Bush proposed cutting from education and local police, fire and emergency workers. They also voted to kill Bush's plan to combine community development block grants, a favorite of many mayors, with dozens of other programs and cutting them by about $2 billion.

The budget sets overall tax and spending targets for later bills that make actual changes in programs and tax laws. Some policies the budget suggests may never be enacted, though the votes often are precursors for what lawmakers eventually do.

Democrats said both GOP plans were too harsh on domestic programs. They said the budget's tax cuts should have been scaled back to make more money available for domestic security, schools, veterans and other programs.

"I think economically and morally, it isn't even a close choice," said Rep. David Obey, D-Wis.

But GOP leaders said now was the time to start slowing benefit programs, which consume nearly two-thirds of the entire federal budget. Even though last year's record $412 billion deficit is expected to shrink, it is not projected to dip below $200 billion by this decade's end, when retiring baby boomers are expected to start driving shortfalls skyward again.

The Senate's budget also opens the door for oil drilling in Alaska's Arctic National Wildlife Refuge, a fight that has been waged for two decades. The House version did not mention the refuge, but that chamber has been receptive to mineral exploration there before.

Unexpectedly, the Senate voted to almost double the budget's tax cuts to $134 billion over the next five years. That is even more than Bush and the more conservative House have sought.

It was unclear whether the Senate's larger tax cut, or the other changes, would survive in the eventual House-Senate compromise budget, which won't be negotiated until after Congress returns from a two-week Easter recess.

Overall, the tax cuts and spending increases the Senate approved during Thursday's votes would cost more than $80 billion over the next five years even as GOP leaders say they want to stanch federal red ink.

GOP leaders want this to be the first year since 1997 that Congress has made reductions in benefits. Passage of the budget would protect later bills making those cuts from filibusters, the Senate delays that take a hard-to-achieve 60 of 100 senators' votes to overcome.

In a win for Bush, the Senate did vote against removing $2.8 billion in agriculture savings from the budget.

The House and Senate budgets follow the general course set by Bush of slowly reducing federal deficits by trimming domestic programs while allowing growth for defense and anti-terrorism programs at home.

All three would also extend expiring capital gains and other tax cuts this year, Bush by $100 billion over five years, the House by $106 billion and the Senate by $134 billion — including the $64 billion added Thursday.