Key senator urges Bush to use his sway on fiscal issues

Incoming Senate Budget Chairman Kent Conrad, D-N.D., says lawmakers will be unable to tackle the nation's fiscal problems unless President Bush uses the bully pulpit to help them.

And with the 2008 presidential campaign already heating up, the window of opportunity is rapidly closing - to perhaps five more months, Conrad said in an interview with CongressDaily.

"If the president is not prepared to lead, then the country's going to have to wait until there is new leadership," he said. "There's no way Democrats with this very slim majority, can possibly do this on their own. And the only way it's going to happen is with presidential leadership. Otherwise we're just marking time, and hopefully not digging the hole any deeper."

A key first step will be to institute "pay/go" requirements that new entitlement programs or tax cuts be offset, Conrad said, most likely as a Senate rules change or as part of the budget resolution, because Bush will not sign it into law.

Conrad said Republicans believe wrongly that pay/go would block extensions of Bush's tax cuts, while entitlement spending would continue unabated. Pay/go can be waived with a supermajority vote, Conrad said. He said the "middle-class" tax breaks such as the child tax credit, which make up about two-thirds of Bush's tax policies expiring in 2011, "are gonna sail through here even if they're not paid for."

Conversely, costly proposals such as a $400 billion plan to fix the "doughnut hole" gap in Medicare drug coverage might have a more difficult time overcoming pay/go.

"I'm not one to oversell [pay/go]," Conrad said. "It doesn't solve all your problems. We've got to do a lot more than pay/go to address these things."

Conrad said he wanted to see a comprehensive approach to debt reduction encompassing spending and revenues.

On spending, Conrad said healthcare entitlements are the "800-pound gorilla," Medicare in particular. "We also have to be very disciplined on the discretionary side. There has to be far-reaching earmark reform because that has just become scandalous," he said. "As a basic principle, we should say everything's got to be offset. You want to do something, bring us the money. Show us the money."

He said the Democrats' "100 hours" plan would cost roughly $40 billion over five years. Allowing Medicare to negotiate drug prices directly with pharmaceutical companies would provide offsets, as would cutting tax breaks to oil and gas companies and eliminating subsidies to private health insurance companies.

In the context of the $14 trillion or so the government will spend over the next five years, he said $40 billion was affordable, especially for crucial policies such as implementing the 9/11 Commission's recommendations.

As for revenues, Conrad said "we've gotta focus like a laser on this tax gap" between what is owed and what is paid. He said Internal Revenue Service Commissioner Mark Everson told him that of the roughly $350 billion annual gap, "we can capture about $100 billion of that without fundamentally changing the relationship between taxpayers and the taxing authority."

As for the "staggering costs" of overhauling the alternative minimum tax so it does not ensnare millions more taxpayers -- up to $1 trillion over 10 years by some estimates -- Conrad said it should be offset but could not yet say how. He said he was waiting for Bush's new budget and Congressional Budget Office analysis before developing a plan.