Senate appropriations chief predicts budget stalemate
With GOP leaders in both chambers heading toward supporting a freeze in non-defense, non-homeland security discretionary spending, Senate Appropriations Committee Chairman Ted Stevens, R-Alaska, Tuesday predicted a budgetary stalemate, at least on the domestic side of the ledger, this year.
"I think, in all probability, we're probably not going to get a budget," Stevens said. "We can't spend over the [fiscal 2004 level], and the only way to live with [fiscal 2004 levels] is to have a continuing resolution. ... It will be very difficult to get it out of the Senate. The tension is money. There's not enough money."
Senate Budget Committee Chairman Don Nickles, R-Okla., and his committee Wednesday were scheduled to begin marking up a fiscal 2005 budget resolution expected to limit discretionary spending to $814 billion as capped by last year's budget resolution. That is $9 billion lower than President Bush's $823 billion request, as estimated by the Congressional Budget Office.
Aides said Nickles plans to reduce defense spending by $7 billion and non-defense by $2 billion, exempting homeland security and leaving non-defense and non-homeland security discretionary spending frozen at last year's levels.
Some Republican senators are advocating increases for domestic programs such as highways, special education and veterans' health care. It will take 60 votes to overcome points of order to increase spending above the budget resolution's limits, unless it is defense spending classified as "emergency," which then would take only 51 votes.
Nickles plans to include a provision making room for $30 billion for Iraq operations. The House version includes $50 billion for war expenses.
"It looks like a tough budget to work with, and we're just going to have to figure out how to do it. He [Nickles] said my subcommittee ... would be very tough, no doubt about it, it will be tough. We've faced tough budget resolutions before, and we've always muddled through," said Senate Labor-HHS Appropriations Subcommittee Chairman Arlen Specter, R-Pa.
The Senate will leave itself the option of using reconciliation protection to extend expiring tax cuts at an $80 billion, five-year cost, Senate sources said. That would allow GOP leaders to shield from filibuster a five-year extension of three tax cuts that expire at the end of this year, should they choose to do so. Nickles said he might also include reconciliation instructions regarding the estate tax and a debt limit increase.
The $80 billion corresponds to the revenue lost by extending certain provisions -- those that increased the child tax credit, increased the standard deduction for married couples and expanded the 10 percent income tax bracket. An additional $13 billion would be incurred in outlays, a Senate aide said, adding up to the $93 billion cost over five years estimated by the Joint Committee on Taxation.
The proposed fiscal 2005 budget resolution also will assume that an increase in the deduction for the alternative minimum tax, which also expires at the end of this year, will be extended. It also assumes the extension of other tax cuts expiring by fiscal 2009, including the tax rate reduction to 15 percent for dividends, capital gains and increased small business expensing. All that adds up to a baseline assumption of $144 billion in revenue loss as a result of tax cuts, Senate aides said.
Other items on the Senate's tax agenda -- such as proposals to repeal the foreign sales corporation/extra-territorial income exclusion and extend the research and development tax credit -- are not included in that figure because it is assumed they will be paired with offsets to make them revenue-neutral, according to one tax aide.
Senate Finance Committee Chairman Grassley said Tuesday that reconciliation protection was a "shotgun behind the door" to be used only as a last resort. But other Republicans questioned whether moving the three expiring tax cuts outside of reconciliation, with offsets, would succeed as a strategy.
"I don't think that is likely to be the best approach," said Sen. Trent Lott, R-Miss. He noted that reconciliation might be needed to ward off non-germane amendments. "I think it would pass, but how do you get it to the floor without all sorts of mischievous and meritorious amendments being offered?" said Lott.
Sen. Olympia Snowe, R-Maine, said she had not yet decided whether she would support a total of $93 billion in tax cuts if they were not offset. She said she was consulting with colleagues on both sides of the aisle.
Susan Davis contributed to this report.