Democrats Nearing Deal on Spending Goals

Democratic budget writers are closing in on a compromise $2.9 trillion blueprint with big spending increases for military and domestic programs and a balanced federal ledger promised in five years.

The Democratic chairmen of the House and Senate Budget committees have been negotiating for weeks in anticipation of a mid-May deadline. They have wrestled over tax cuts, spending levels and how to rewrite college aid programs later this year.

The budget plan sets goals for subsequent tax and spending legislation, but lawmakers are not bound to it. It does, however, make a statement about the priorities of majority Democrats and provides an early test of the party's ability to prove it can govern.

"It's important, I think whoever's in charge, for the Congress of the United States to demonstrate that they can perform the essential functions of governance," said the Senate committee chairman, Sen. Kent Conrad, D-N.D. "Having a budget is about as basic as it gets."

Approving a House-Senate compromise budget is a prerequisite for the orderly consideration of 13 spending bills this summer for the government's 2008 budget year, which begins Oct. 1. Democrats promise to get the annual appropriations process back on track after Republicans failed in 2006 to pass a budget and left most of the spending bills for the current year undone.

For 2008, Democrats would award a huge $50 billion spending increase to the Pentagon's "core" budget — the $481 billion not directly related to the wars in Iraq and Afghanistan. They also are on track to boost domestic agencies' spending by a less generous $20 billion, likely prompting a fight this fall with President Bush, who would want to spend less.

The budget plan also would cement a promise by Democrats to restore pay-as-you-go rules. Republicans abandoned these in 2001 in order to pass President Bush's tax cuts.

With the pay-go rules in place, no tax cuts or benefit increases in programs such as Medicare, children's health care or farm subsidies can occur if they result in additional government borrowing.

This would make it more difficult to expand the popular State Children's Health Insurance Program, which is up for renewal this year, or ease the alternative minimum tax so that it does not strike 20 million more middle-class taxpayers.

Pinched for the money to do either, Congress is likely to waive the rule when dealing with big-ticket budget items.

To a large degree, the talks between Conrad and his House counterpart, Rep. John Spratt Jr., D-S.C., have focused on whether to renew Bush's middle-class tax cuts that expire at the end of 2010. House negotiators protested that the move would erase projected budget surpluses — and run counter to the pay-as-you-go rule.

The Senate, however, is insisting on almost $180 billion in tax cuts over 2011-12, enough to assume extending tax relief for married couples, people with children and those inheriting large estates.

House Republicans are poised to force a vote Monday on accepting the Senate's position on taxes and are likely to win impressively, though the result would be nonbinding.

House Democrats, meanwhile are devising an arcane "trigger" mechanism that would block tax cuts from advancing through the House if predicted budget surpluses do not show up as expected.

Republicans say that not renewing Bush's tax cuts will amount to the "largest tax increase in American history" come 2010. Votes on the cuts, however, probably will not take place until after next year's presidential election. What happens will depend on which party control Congress and the White House then and how the economy looks.