Budget Alert: March 22, 2007

House Budget Committee Marks-Up $2.96 Trillion ’08 Budget Plan;
Senate Votes to Extend Middle Class Tax Cuts in ’08 Budget Resolution;
2007 Supplemental: House Dems Seeking Votes, Senate Outlines Bill

HOUSE BUDGET COMMITTEE REPORTS $2.96 TRILLION BUDGET PLAN

Early Thursday morning, the House Budget Committee approved, on a party-line 22-17 vote, an FY’08 Budget plan proposed by Chairman John Spratt (D-SC). Highlights of the House Budget plan:

• Fully funds the President’s defense request;
• Calls for higher non-defense discretionary spending levels than the Senate Democratic plan in each of the next five fiscal years (and $19 billion higher than the President’s Budget in FY 2008);
• AMT relief to be contingent on identifying offsets;
• Would allow the 2001 and 2003 tax cuts to expire at the end of 2010, unless spending cuts or tax increases are identified to pay for extending the tax cuts;
• Would use the additional revenues to increase non-defense discretionary spending levels (as noted above) and achieve a $153 billion budget surplus in 2012;
• Would establish discretionary spending caps for fiscal year 2008, allowing for upward adjustments for programmatic enforcement activities that will generate savings (disability reviews, tax enforcement, and combating Medicare and unemployment insurance fraud);
• Limits the amount of advance appropriations for FY 2009 and 2010 to $25.558 billion for as yet unspecified programs;
• Makes heavy use of unfunded “reserve funds” to accommodate a broad range of legislation, provided such legislation does not increase deficits over the next 5 years or the next 10 years, including: expansion of SCHIP; AMT relief; middle income tax relief; improving access to Medicare; making college more affordable; promoting alternative energy sources; providing affordable housing; and reauthorizing the farm bill; and
• Does not include Budget Reconciliation instructions, except for a minor instruction to the Education and Labor Committee to reduce mandatory spending by $75 million over 5 years.

See our Budget Resolution Summary Table for a comparison of the House Budget Committee plan, the Senate Budget Committee plan, and the President’s ’08 Budget request.

House Budget Committee Tables

Text of Budget Resolution

Additional Background on Budget Resolution

SENATE CONTINUES CONSIDERATION OF ’08 BUDGET RESOLUTION:
Baucus Amendment Extends Middle Class Tax Cuts; Sets Estate Tax Level; Adds SCHIP Money

On Wednesday the Senate continued consideration of the ’08 Budget Resolution. During the course of Wednesday’s Floor action, the Senate took the following key actions:

By a vote of 97-1 passed an amendment offered by Senate Finance Chairman Max Baucus (D-MT) to change the revenue levels in the Budget Resolution to accommodate Finance Committee action that would:

• extend middle class tax cuts (marriage penalty, child tax credit, adoption tax credit; 10% tax bracket);
• extend the current estate tax rate and exemption level (rather than returning to 2001 levels after 2010); and
• provide $15 billion for renewal and expansion of the State Children’s Health Insurance Program (SCHIP).

Context: Further action is contingent on the Senate Finance Committee reporting such legislation—which will not be a filibuster-proof Reconciliation bill. Such legislation could get bogged down in the politics surrounding the estate tax (as well as non-extension of the dividend and capital gains tax cuts). The overall effect of the Baucus amendment on the Conrad budget plan is to erase the budget surplus in 2012.

Defeated, 47-51, an amendment by Sen. Jon Kyl (R-AZ) to extend lower rates on capital gains and dividends, and raise the estate tax exemption to $5 million as well as lower the maximum estate tax rate to 35%.

Context: The Baucus and Kyl amendments highlight the near unanimity regarding extension of lower and middle income tax cuts and the ongoing partisan divide over capital gains, dividends, and estate tax cuts.

Defeated, 46-52, an amendment by Sen. Jeff Sessions (R-AL) to exempt new tax cuts (including extension of expiring tax cuts) from the PAYGO rules.

Context: This amendment would have eliminated the proposed 60-vote point of order against tax cuts that are not “paid for” by offsetting tax increases or spending cuts.

Defeated an Ensign amendment, 47-51, to establish a firewall between defense and nondefense spending. (would have precluded the Appropriations Committee from moving defense dollars into non-defense programs).

Context: This would have limited the authority of the Appropriations Committee to determine the allocation of discretionary funds between defense and non-defense discretionary spending.

FY 2007 SUPPLEMENTAL UPDATE

House Leadership is still working to nail down 218 votes to pass H.R. 1591, the $124 billion FY 2007 supplemental appropriations bill reported last week by the House Appropriations Committee. The bill contains language requiring withdrawal from Iraq by August 2008, causing heartburn for Democrats on the left who want an earlier withdrawal.

Text of H.R. 1591

Committee Report

Senate Appropriations Committee will mark-up today, Thursday, the Senate’s version of the FY 2007 supplemental measure. The Senate bill requires the President to “commence the phased redeployment of United States forces from Iraq not later than 120 days” following enactment and would legislate a “goal of redeploying by March 31, 2008, all U.S. combat forces...except for a limited number.”

Senate Iraq Language and Statement by Senator Byrd

BUDGET PROCESS: STEP-BY-STEP™

’07 WAR SUPPLEMENTAL:

• March 22 (TENTATIVE): House Floor action on FY 2007 Supplemental

Context: House Democrats still seeking 218 votes for passage.

• March 22: Senate Appropriations Committee mark-up of FY 2007 Supplemental, 2pm SD-106.

• Week of March 26: Possible Senate Floor action on FY 2007 Supplemental.

’08 BUDGET RESOLUTION:

• March 22-23: Senate to complete Floor action on FY 2008 Budget Resolution.

Context: Because Senate Floor debate is limited (50 hours), the Budget Resolution cannot be filibustered. (As of Thursday morning, 25 hours remain.) Amendments must be germane, and debate on amendments is generally limited to 2 hours (1 hour for 2nd degree amendments, i.e., amendments to amendments). Because the 50 hour limit applies to debate, but not to the offering of amendments, the Senate typically has a vote-a-rama at the end of the 50 hours with a long series of votes, often consuming hours.

• Week of March 26: House Floor debate on FY 2008 Budget Resolution.

CBO RELEASES NEW NUMBERS ON PRESIDENT’S BUDGET

Today the Congressional Budget Office released “An Analysis of the President’s Budgetary Proposals for Fiscal Year 2008. The updated numbers for the President’s Budget are reflected in our Budget Resolution Summary Table. In general, CBO concludes that compared to their baseline (which assumes that tax cuts expire in 2010, discretionary spending is adjusted for inflation, and entitlements continue on auto-pilot), over a 10-year budget window the President’s proposals would:

• increase the cumulative deficit by $1.6 trillion;
• reduce revenues by almost $1.6 trillion, mainly by extending tax provisions scheduled to expire in 2010;
• decrease discretionary spending by $424 billion, mostly for nondefense activities; and
• increase interest payments by $323 billion, due to increased debt.

CBO's Analysis of the President's FY 2008 Budget