Senate budget leader suggests hike in discretionary spending

Senate Democrats are proposing $949 billion in overall discretionary spending for the fiscal year beginning Oct. 1, Budget Chairman Kent Conrad, D-N.D., said Wednesday, setting up a clash with the White House.

That figure is $16 billion above President Bush's fiscal 2008 budget request -- with another $2 billion on top of that in the form of "advance appropriations" from the following fiscal year, a maneuver members of both parties have called a "gimmick."

Conrad's proposed discretionary spending cap, which will have to be negotiated with the House, is contained in his roughly $2.9 trillion fiscal 2008 budget resolution the panel will mark up Wednesday and Thursday. Conrad's plan would preserve Bush's nearly $50 billion proposed increase for the Pentagon, and assumes most of the discretionary spending above Bush's overall $933 billion request will go toward domestic programs.

Bush's supplemental war spending requests for fiscal 2008 and fiscal 2009 are preserved, for an additional $195 billion toward the war effort in Iraq and Afghanistan.

Conrad assumes revenues will be $439 billion above Bush's proposal over five years, which offsets an additional $126 billion in non-defense spending over that time. He proposed $15 billion in Medicare savings, which would go toward the cost of providing State Children's Health Insurance Program coverage for all eligible children.

The total SCHIP proposal would provide up to $50 billion over five years, requiring the committees of jurisdiction to come up with offsets for the additional $35 billion under pay/go rules. The combined effect of the revenue and spending proposals would lower the deficit, Conrad assumes, achieving a $132 billion surplus at the end of five years.

Conrad assumes a two-year alternative minimum tax patch, requiring the remaining three years to be offset. He said his budget would allow Bush's tax cuts expiring in 2010 to be extended, but only if they are offset. By making no assumptions on major tax policies, the budget plan effectively punts those decisions until after the 2008 elections.

"I think that's just reality," Conrad said. He assumes the additional $439 billion in revenues can be achieved through closing the "tax gap" and cracking down on offshore tax havens -- which he said could potentially yield nearly $2.8 trillion in revenues over five years -- as well as from "truly egregious tax loopholes."

Republicans said it is unrealistic to expect such savings from tax compliance measures, and said Conrad was setting the stage for tax hikes. An Office of Management and Budget spokesman said effective tax enforcement measures such as Conrad envisions could be so onerous as to "overwhelm individuals and small businesses."

While the administration was "encouraged" that Senate Democrats are striving to achieve a balanced budget, the spokesman said it opposes doing so through "higher taxes, higher spending and budgetary gimmicks" while avoiding bigger entitlement savings.

Senate Budget ranking member Judd Gregg, R-N.H., said since three years of AMT relief are unaccounted for in the budget, the overall effect of Conrad's revenue proposals could amount to $900 billion in tax increases over five years. "It's a tax, spend and debt budget," he said.