Spending proposals leave moderates in tough position

In January, a group of social services providers descended on Rep. Rob Simmons, R-Conn., in his Norwich office. Their goal: to persuade him to vote against a $39 billion budget-cutting bill that they believed slashed programs crucial to students, low-income families, and children. "We told him what our concerns were, and we tried to emphasize what impact the cuts would have in his district," recalled Ellen Scalettar, senior policy fellow at Connecticut Voices for Children.

Simmons, a moderate who faces a fierce re-election battle in a Democratic-leaning district, knew that his decision on the budget reconciliation bill could have a huge effect on his political future. He had voted against the House version of the measure in November, but had supported the conference report in December. Because of parliamentary maneuvering in the Senate, the conference report faced a February 1 revote in the House. The outcome was going to be close, and President Bush and House GOP leaders wanted his support.

But on January 25, Simmons announced that he would vote no. "I wasn't sent here to be a cheerleader for the executive branch," he said in a recent interview, adding that he disagrees with budget cuts that Republican leaders continue to propose. "It puts [moderate Republicans] under pressure."

Simmons, however, hasn't gotten much of a break from that pressure. On February 6, President Bush sent Congress a $2.77 trillion budget for fiscal 2007 that, while boosting defense and homeland-security funding, would cut other discretionary spending by 0.5 percent and eliminate or sharply reduce 141 programs. Bush also proposed another round of budget reconciliation to find $65 billion in savings over five years in mandatory entitlement programs like Medicare and Medicaid.

As Congress began to move on the president's proposal in early March, Simmons and other like-minded moderates knew it was important to make themselves heard. After all, moderate Republicans had been unusually bold -- and unusually successful -- in shaping last fall's budget reconciliation debate. They forced House and Senate GOP leaders to scale back some of their entitlement and tax cuts, and to abandon a plan to open the Arctic National Wildlife Refuge to oil drilling.

So Simmons on March 8 joined 62 other House Republicans in signing a letter urging House Budget Committee Chairman Jim Nussle, R-Iowa, to reject Bush's proposal to cut Medicare spending by $36 billion over five years. "The budget's steep Medicare reductions could hurt the people who depend on the program for care," wrote the mostly moderate GOP group.

But the same day that the moderates' letter was publicly released, congressional conservatives laid down their own bold marker for this year's budget debate. For months, many conservatives have argued that the way to overcome all of the problems -- and the abysmal poll numbers -- that have had Bush and their party reeling during the past year is to return to bedrock principles of smaller government and deficit reduction.

At a March 8 rally on the Cannon House Office Building terrace, members of the conservative House Republican Study Committee released an austere, balanced-budget proposal based on the Contract With America, which they credit with vaulting their party to power. "House conservatives believe that this Republican Congress should return to our 1994 roots of fiscal discipline and reform," declared Rep. Mike Pence, R-Ind., the RSC chairman.

The RSC plan proposes reducing the deficit by $392 billion over five years, while achieving entitlement savings of $358 billion through reconciliation. It would significantly restructure three Cabinet departments (Commerce, Energy, and Education); block-grant Medicaid and most federal education programs; cap Medicare growth; rescind highway bill earmarks; and end federal subsidies for Amtrak, public broadcasting, and the arts and humanities endowments, among other longtime conservative targets.

The early skirmishing between moderates and conservatives signals that congressional Republicans have an extremely difficult budget year ahead of them, given the political woes and the fiscal constraints that they face.

The approaching midterm elections appear to pose the greatest threat to the House and Senate GOP majorities since 1994, yet the party is arguably more riven by internal divisions than at any time in the past dozen years, a predicament that is likely to make agreement on contentious budget issues all the more elusive. And easy budget answers aren't exactly handy in any event: Deficits continue to mount, with the Iraq war and the Gulf Coast hurricane relief and reconstruction effort soaking up huge amounts of money. Budget writers looking for cuts are finding that many of the relatively painless ones are gone.

In recent days, congressional Republicans have begun to craft their fiscal 2007 budget resolutions, which will set their game plan for the rest of the year. Through the debate over the budget resolution, they are deciding whether to undertake another round of reconciliation to curb entitlement spending or pursue further tax cuts, and how much discretionary spending to allow in the appropriations bills. Early on, Republicans also must shepherd a $90 billion-plus fiscal 2006 "emergency" supplemental spending bill for the Iraq war and Gulf Coast aid, which the House was debating at press time.

These budget decisions -- and the ones that follow -- will be amplified by the fact that Congress's other legislative output is expected to be paltry this year. Fiscal matters will become a focal point and could reverberate along the campaign trail. Whether that is to the detriment or the good of the GOP majority remains to be seen.

Roiled Over Reconciliation

In the House, the chaos caused by the early moderate-conservative clashes contributed to the Republican leadership's decision to delay a Budget Committee markup of the fiscal 2007 budget resolution until after the weeklong St. Patrick's Day recess. The more moderate Senate, meanwhile, was debating a fiscal 2007 budget resolution at press time that surely had many conservatives seeing red.

As crafted by Senate Budget Committee Chairman Judd Gregg, R-N.H., and approved by his panel on March 9, the Senate's budget resolution heeds Bush's call to set overall fiscal 2007 discretionary spending at $873 billion. But the Senate plan assumes that appropriators will shift some $5 billion from defense and foreign-aid accounts to domestic programs like education and health care.

Moreover, Gregg rejected calls by Bush and congressional conservatives for another round of budget reconciliation to pass further tax cuts and curb entitlement programs like Medicare and Medicaid. Instead, Gregg permitted reconciliation only so that a plan to allow ANWR drilling can reach the Senate floor with a protection against filibusters.

"I'm willing to do [reconciliation]. I don't think the votes are there to do anything substantial," Gregg said in an interview before his committee's markup. "I would like this budget to be stronger in the entitlement area. But this year, the reality is ... it is not going to be."

To be sure, the "reality" of last year's reconciliation effort was that it became a nightmare for GOP leaders and key committee chairmen. In both chambers last fall, they had to engage in arduous 11th-hour negotiations with moderate holdouts over contentious provisions. Then it took numerous cliff-hanger floor votes -- including a Senate tie broken by Vice President Cheney -- before Bush was finally able to sign the fiscal 2006 reconciliation bill into law on February 8.

By historical standards, though, that bill was minuscule, saving $39 billion over five years compared with reconciliation bills of the 1990s that saved between $118 billion and $482 billion. And pending tax cuts will probably eat up that $39 billion. "They huffed and they puffed, and they didn't produce a great deal when it came to the bottom line," said Urban Institute President Robert Reischauer, who served as director of the Congressional Budget Office during the Clinton administration.

Nevertheless, Nussle is intent on finding some reconciliation savings when the House Budget Committee marks up its fiscal 2007 budget resolution, presumably during the last week of March. "It's my view that we should do reconciliation every year," Nussle said in an interview. Still, he acknowledged that the $65 billion in entitlement savings called for in the president's budget is "not reasonable."

Looking over Nussle's shoulder is the Republican Study Committee, more than 100 members strong, which is insisting on reconciliation. "You don't lose weight until you get on the scale every day," Pence, the RSC chairman, said in an interview. "We're adamant."

Conservatives say that their party must appeal to its base, and they contend that moderates haven't been hurt by fiscal conservatism in the past and wouldn't be hurt by it this November. "There were moderates in the Congress when we passed the Contract With America in 1994," said Rep. John Shadegg, R-Ariz., a former RSC chairman.

House conservatives expect their chamber to agree on another round of reconciliation -- and the Senate, too, once the budget resolution goes to conference. "Sooner or later, we expect the Senate to get this," said Rep. Gil Gutknecht, R-Minn.

For their part, Republican moderates believe that any large reconciliation measure will doom them on Election Day. "Their constituents are watching how much is being cut," said Sarah Chamberlain Resnick, executive director of the Republican Main Street Partnership, a moderate organization with members on and off Capitol Hill. "The real key is that the base in a swing district is very different than the base in a Republican Study Committee district."

If congressional Republicans go ahead on reconciliation, the going surely won't be easy. Budget analysts say that lawmakers are realizing that they have already achieved many of the easier savings in entitlement programs. Finding additional savings would mean fundamentally overhauling these programs -- something that has proven politically impossible (witness the Social Security and Medicare reform efforts of late).

"A lot of the low-hanging fruit has been picked," said G. William Hoagland, the budget and appropriations adviser to Senate Majority Leader Bill Frist, R-Tenn. "We've known all along this was coming. You're looking at the hard cookies."

Tom Kahn, Democratic staff director of the House Budget Committee, agreed, saying that after last year's round, "reconciliation fatigue" has set in. "It's hard to imagine how they would want to move another bill that cuts Medicare, Medicaid, and education," he said. "Last year's 'low-hanging fruit' wasn't hanging very low."

Even some of the Republican chairmen of authorizing committees -- who would be responsible for coming up with savings proposals for entitlement programs under their jurisdictions -- aren't very keen on another round of reconciliation.

Senate Finance Committee Chairman Charles Grassley, R-Iowa, said his panel, which oversees Medicare and Medicaid, is deeply divided over reconciliation, and he cautioned that moderate Sens. Olympia Snowe, R-Maine, and Gordon Smith, R-Ore., hold all the cards. Reconciliation will be decided by "the extent to which I get Snowe and Smith to agree to it," Grassley said.

Senate Agriculture, Nutrition, and Forestry Committee Chairman Saxby Chambliss, R-Ga., said that from his perspective, reconciliation isn't do-able. "We told [the Budget Committee] we just can't find any more money," he said. "Here we are, a year away from writing another farm bill. That's not the time to address additional savings. I don't think we'll have the votes in committee to do anything." House Agriculture Committee Chairman Bob Goodlatte, R-Va., and ranking member Collin Peterson, D-Minn., have echoed those sentiments.

If anyone should be sympathetic on reconciliation, it is Sen. Pete Domenici, R-N.M., who put together numerous reconciliation bills as the Senate Budget Committee's chairman or ranking member during the 1980s and '90s. But this year, as chairman of the Senate Energy and Natural Resources Committee, Domenici is objecting to more than $800 million in entitlement savings that the Bush administration proposed in programs under his jurisdiction. Domenici asked Gregg not to assume savings for them in his fiscal 2007 budget resolution.

A Matter of Discretion

When Congress turns to the discretionary side of the budget -- writing the annual appropriations bills -- conservatives contend that the president didn't go far enough in proposing to cut nondefense, non-homeland-security spending by 0.5 percent. They believe that their "Contract With America Renewed" budget, calling for far steeper cuts, would help most Republicans at the ballot box this fall.

"Fiscal discipline is a tough sell in a few marginal districts," Pence said in an interview. "But runaway federal spending is a liability in every Republican's district. If we don't renew the confidence of the American people to our commitment to fiscal discipline, Congress could be a very different place in 2007."

But Democrats, moderate Republicans, and some veteran pragmatists in both parties think that even Bush's plan will be a tough sell in Congress, particularly in an election year.

Democrats on the House Budget Committee estimate that the president's budget would cut domestic discretionary spending $16.8 billion below the level needed to continue current services. "Over the next five years, the proposed cuts in domestic discretionary funding will have a significant effect on a wide array of programs that provide services many Americans regard as important," the liberal Center on Budget Policy and Priorities said in a February analysis of the Bush plan.

Moderate Republicans have responded to the president's budget by appealing for funding for programs, such as Amtrak or Community Development Block Grants, that directly affect their constituents. "We have an obligation to promote the general welfare," Simmons said. "I'm not sure that we're promoting the general welfare when we're cutting many of these programs."

Several seasoned appropriators contended that the funding levels in the Bush budget are so low that they could not win passage, particularly in the Senate. Sen. Ted Stevens, R-Alaska, a former Senate Appropriations Committee chairman, told reporters, "The budget looks pretty lean to me. It's going to be pretty tough to live with."

Moderate Sen. Arlen Specter, R-Pa., who chairs the Appropriations Labor, Health and Human Services, Education and Related Agencies Subcommittee, has called the Bush budget "scandalous" and "unrealistic." And Sen. Tom Harkin, D-Iowa., the ranking member on Specter's subcommittee, added: "If the Budget Committee adopts the president's numbers and the Senate adopts the president's numbers, there's no way we'll pass any appropriations bills."

Gregg, himself an appropriator, also believes that Bush's domestic discretionary spending proposal was too low. In crafting the Senate's budget resolution, he called for spending $1.5 billion more than the president did on education programs and $1.5 billion more on health programs.

Frist adviser Hoagland predicted that Republicans may press throughout the budget process to hold to the president's $873 billion ceiling in fiscal 2007 discretionary spending, but with a different mix, as Gregg did in his budget resolution. "Politically, I don't think the will is there to do the president's nondefense discretionary number," Hoagland said.

Gregg is incensed at the administration's decision to put defense funding ahead of domestic spending. "The administration is running two sets of books here," he said. "It doesn't seem realistic that defense is so high and nondefense is so low. There will be some adjustment. There are two sets of books, and one is not subject to the budget controls."

The Bush administration and Congress have paid for much of the cost of the Iraq war through supplemental spending bills that designate the funding as "emergency" and therefore not subject to budget constraints. From 2003 to 2005, Congress approved four Iraq supplementals totaling $250 billion, and an additional $90 billion Iraq supplemental bill is pending.

In this tight budget year, analysts -- including Hoagland -- predict that Congress will shuffle additional, non-Iraq-related defense costs into supplemental spending bills, to free up more money for domestic discretionary accounts. Congress has used this tactic in other recent years.

Conservatives object to such shell games. RSC leaders have written to House Appropriations Committee Chairman Jerry Lewis, R-Calif., urging him to keep supplemental spending bills as "clean" as possible, free of items not requested by the president and not truly emergencies. "It's simply time we restore fiscal discipline to this process and pay for these expenditures by making choices among competing spending priorities," Pence and Rep. Jeb Hensarling, R-Texas, chairman of the RSC's Budget and Spending Task Force, wrote to Lewis.

When asked about the House conservatives' objections, Hoagland replied, "We have enough problems in the United States Senate without worrying about the House of Representatives right now."

Indeed. Besides all the political problems and fiscal constraints threatening the budget process this year, Republicans also have the calendar working against them. The House is scheduled to be in session just 79 days between now and October 6, when Congress hopes to adjourn for the elections, according to the House Appropriations Committee. The fiscal year ends on September 30, but Congress seldom finishes the funding measures by then.

For appearance's sake, GOP leaders want to avoid having to finish the appropriations bills in a lame-duck session after the election, as happened in 2004. "If they can't pass a budget, it calls into question a fitness to govern," said Rep. John Spratt, D-S.C., the House Budget Committee's ranking member.

In the end, Republicans will probably use smoke and mirrors, Reischauer predicted, and the successful completion of the budget and appropriations year will rely on the "ingenuity and creativity with which expenses are shifted into other accounts." In other words, he said, someone will be put in charge of "packing 300 pounds of spending into a 200-pound sack."