The budget resolution plan passed by the House Budget Committee is far worse than the Senate plan. Nevertheless, the "fiscal discipline" of both plans is based on huge cuts in domestic spending for programs and services that most Americans value in order to extend tax cuts to wealthier Americans.

On March 12, the full Senate passed its budget resolution, S. Con. Res. 95, for fiscal year 2005 (beginning October 1, 2004) by a 51-45 vote. On March 17, the House Budget Committee approved its budget resolution by a 24-19 vote. House floor debate is scheduled to begin on March 24. Following full House approval, a House-Senate conference will take place to arrive at one version of the resolution, which must be voted on in both the House and Senate to become a concurrent budget resolution for the new fiscal year.

Budget enforcement rules are one of the most important parts of these budget resolutions. While the Senate included some enforcement rules in its resolution, the House has drafted a separate "budget enforcement" bill (H.R. 3973). Still unknown, is when the vote on the budget enforcement bill will take place -- it may go before, or after, or on the same day as the vote on the actual budget resolution. The timing may be very important, given that some members of the House may not vote for the resolution without having the enforcement procedures in place. Below is a comparison of the main provisions taken from the House and Senate budget resolutions (included in the House version are the enforcement rules contained in H.R. 3973.)

 

HOUSE BUDGET COMMITTEE RESOLUTION AND H.R. 3973 PROVISIONS Binding five-year caps, or limits, on discretionary spending. Pay-as-you-go (Pay-go) through 2009 that applies to mandatory increases, but not to enacted or new tax cuts, so that extending or making permanent the 2001 and 2003 tax cuts is exempt from budget discipline. Pay-go is enforced by "sequesters," or automatic across-the-board cuts. $818.7 billion limit to discretionary spending for FY 2005. Caps are enforced by "sequesters," or automatic across the board spending cuts. $137.6 billion in "reconciled" tax cuts that are exempt from filibuster and a 60-vote requirement in the Senate, a proposed extension of the child tax credit, standard deduction for married taxpayers, a 10 percent bracket expansion, the dividend and capital gains tax cuts, the research and development credit, and a one-year fix of the alternative minimum tax. $15 billion in other tax cuts. $13 billion in reconciled program cuts, (Ways and Means - $8.2; Energy and Commerce - $2.1; Gov't Reform - 2.3; Ag Committee - $371 million; Ed and Workforce - $43 million.) with the likelihood of a $2.1 billion cut from Medicaid.

SENATE BUDGET RESOLUTION PROVISIONS Binding two-year caps on discretionary spending. A "clean" pay-as-you-go extension that applies to mandatory spending increases and to enacted or new tax cuts. $821 billion in discretionary spending for FY 2005. $80.6 billion in reconciled tax cuts proposed for a five-year extension of the child tax credit, standard deduction for married taxpayers, 10 percent bracket expansion, and a one-year acceleration of estate tax repeal. $63 billion (using a $20 billion offset) in other tax cuts proposed for a five-year extension of the dividend and capital gains tax cuts, permanent repeal of the estate tax, a one-year “fix (?)” of the alternative minimum tax (AMT), and tax relief in the energy bill.

Two of the most damaging provisions from the Senate Budget Committee’s resolution were stripped out of the final version: (1) the pay-go rules were extended to tax cuts as well as mandatory spending, and (2) the cuts to EITC and Medicaid were eliminated. However, the increase in discretionary spending -- from $814 billion to $821 billion -- was primarily to accommodate higher military, not domestic, spending. This budget plan still will require big cuts in domestic discretionary (appropriated) spending at the same time that it reduces revenue by accelerating the repeal of the estate tax, a tax break for multimillionaires, for one year.

As expected, the House Budget Committee budget plan is even worse. The exemption of tax cuts from the pay-go rules means that the 2001 and 2003 tax cuts can ultimately be made permanent, at the huge cost of $1.2 trillion over the next ten years, without requiring any offset. Unfortunately, cuts in government services that most ordinary Americans value have been the preferred means for Congress to "discipline" the budget, while tax cuts to the wealthy require no restraint. The House plan only allows $386 billion for all domestic appropriated spending (excluding military and homeland security.) Additionally, Congress is requiring $13 billion be cut from entitlement spending, of which, $2.2 billion is likely to come from the Medicaid program. According to a Center on Budget and Policy Priorities’ analysis, domestic discretionary programs outside of Homeland Security would be cut by a total of $120 billion over five years under this plan.

The notion of Congress reducing budget deficits by extending tax cuts (such as the estate tax repeal and the capital gains and dividend tax cuts) that primarily benefit wealthier Americans, while putting government programs and services that benefit low- and middle-income American families on the chopping block is unbalanced and ineffective. What makes this notion even more inequitable is the fact that tax cuts along with the economic downturn, and not growth in spending, are actually the primary cause of the deficit. The Center on Budget and Policy Priorities recently put out an analysis that disproves the assertion that tax-cuts pay for themselves. Last week, House Budget Committee Chair Nussle (R-IA) explained that while certain cuts, such as those for entitlements, need to be apart of the offset providing pay-as-you-go program, other cuts, such as tax-cuts for certain economic classes, do not need offsets because they will pay for themselves. Center for Budget and Policy Priority’s analysis takes the crux of Nussle’s argument and illustrates how “no reputable economist — liberal or conservative — has ever shown that tax cuts pay for themselves.”