Democrats see key ingredients for passage of 2011 budget

Key Democrats say they are confident of passing a fiscal 2011 budget this year, but added they face growing challenges with the need to fund efforts to create jobs in the wake of a severe economic recession, all the while looking for ways to cut the historically high deficit.

To complete the task, Democratic leaders will have to develop a document that fiscally conservative Democrats can vote for without alienating liberal Democrats who want to protect spending for social programs.

President Obama Monday kicked off the process by unveiling his fiscal 2011 budget proposal, which includes a three-year freeze on nonsecurity spending, which administration officials have claimed will not short Democratic priorities.

"It is more difficult work" than last year, said Senate Budget Committee Chairman Kent Conrad, D-N.D., adding that he expects Democrats to pass a fiscal 2011 spending plan.

"That is always the case in the aftermath of a sharp downturn," Conrad said. "There is so much anxiety and even anger [among Americans over government spending and unemployment]. That is why we have got to send the message that we are getting ready to pivot" to focus on lowering the deficit after spending to create jobs.

Sen. Benjamin Cardin, D-Md., a member of the Budget Committee, echoed Conrad, saying "this budget year is a transition from jobs to fiscal discipline."

In his State of the Union address on Wednesday, Obama urged Congress to send him a jobs bill, and Senate Democrats plan to roll out their jobs package this week. The House last month passed a $150 billion jobs bill that would use $75 billion in Troubled Asset Relief Fund dollars to pay for infrastructure projects.

Conrad also said he will explore using reconciliation in the fiscal 2011 budget to prevent Republicans from blocking legislation by requiring 60 votes for passage. The Senate "is in danger of becoming dysfunctional, and I think frankly we have to reconsider the rules by which this body is governed," Conrad said. "We have got to take action on this agenda for the country." He added: "This body was designed to slow things down. It was not designed to prevent important action on the problems facing the country."

Democrats have charged that Republicans have abused the filibuster to stymie their legislative agenda. That practice "puts a great deal of pressure on going to more of a reconciliation process to deal with things," Conrad said. "I say that as somebody who understands very well the limitations."

Conrad did not provide any examples of what he had in mind. "We're going to have to take a very close look at doing that if this is the way the place is going to function -- if people are going to insist on a cloture petition," he said.

One item that Democrats could pass with reconciliation is Obama's proposal to tax banks to recoup TARP funds, said Senate Budget ranking member Judd Gregg, R-N.H., a proposal he does not support. He warned that if Democrats were so inclined, they would likely pay a political price for gaming budget rules to pass partisan legislation.

While the recession -- the deepest since World War II -- technically ended last year, the recovery has been painfully slow with unemployment hovering at 10 percent.

House Budget Committee Chairman John Spratt, D-S.C., said that it will be "a tough slog" until unemployment comes down and it feels as if the recovery is truly under way. The Congressional Budget Office last week projected that unemployment will decrease to 5 percent by 2014.

Spratt added that while "it's never easy to put a budget together and this one will be no exception," he is confident of striking the right balance and passing an fiscal 2011 budget.

But some divisions are starting to show among the Democrats over Obama's proposed spending freeze.

The freeze -- which will not affect defense, homeland security, veterans' programs, or foreign aid -- would save about $250 billion over 10 years, but that figure is dwarfed by the $6 trillion, 10-year deficit projected by CBO, which also put the fiscal 2010 deficit at $1.35 trillion, or 9.2 percent of the gross domestic product. It would be the second-highest deficit, as a share of the economy, since the end of World War II.

Conrad said that while the freeze sends an important signal, more needs to be done.

But Senate Labor-HHS Appropriations Subcommittee Chairman Tom Harkin, D-Iowa, called for also exempting many of the programs under his panel's jurisdiction.

"National security has more implications than just defense or homeland security," Harkin said. "It has to do with the health and the welfare of our people, the education of our kids, the safety of our streets, the availability of jobs and economic opportunity all has to do with the security of this country."

House Speaker Nancy Pelosi, D-Calif., and other House Democratic leaders have called for including defense and other spending as a way of preventing cuts to Democratic priorities.

House Democratic Caucus Vice Chairman Xavier Becerra of California said last week, "We have to protect our troops, provide them with everything they need ... but I'm not interested in a lot of single-source contracts that are overrun by millions or billions being paid for by taxpayers, so everyone should be scrubbed including the Pentagon, including Homeland Security."

In another attempt to rein in the deficit, Obama plans to create a commission by executive order that would make recommendations on how to reduce the deficit. The commission would make its recommendations after the November congressional elections and before the end of the year.

The Obama commission proposal comes after a proposal to create a similar commission whose recommendations Congress would have had to consider -- offered by Conrad and Gregg as an amendment to legislation to raise the national debt -- failed last week to win the 60 votes needed to pass.

After failure of that amendment, Conrad and a group of other fiscally conservative Senate Democrats finalized an agreement on the presidential commission to secure their votes for the $1.9 trillion increase in the debt limit. That legislation passed 60 to 40, along party lines.

Under the agreement, House and Senate Democratic leaders committed to hold a vote on the presidential panel's recommendations, according to a letter dated Thursday from Vice President Biden to Conrad.

House Democratic leaders had been tepid on the commission idea, but used it as leverage to get the Senate to pass an amendment to the debt bill to make pay/go rules law -- thus fulfilling their promise to the Blue Dog Coalition for supporting the fiscal 2010 budget resolution.

Pay/go requires that increases in mandatory spending or tax cuts must be offset.

But the Senate pay/go amendment, which passed the Senate Thursday on a 60-40 party-line vote, would exempt patches to the alternative minimum tax and reduction of the estate taxes for two years. Providing higher Medicare payments to physicians would be exempted for five years. However, the 2001 and 2003 tax cuts for the middle class would not be limited.

The limits on the exemptions are compromises from the House-passed pay/go bill, which exempted all those items with no time limits.

House Majority Leader Steny Hoyer, D-Md., said late last week he intends to bring the debt ceiling bill to the House floor this week.

Giving pay/go the force of law is expected to help smooth the way for passage of the fiscal 2011 budget in the House, according to Rep. Dennis Cardoza, D-Calif., a Blue Dog.

Focusing on fiscal responsibility "is the only way they would get Blue Dog votes for the budget," Cardoza said. "If [pay/go] doesn't [become law, Democratic leaders are] going to have a really tough, rocky road" trying to get any legislation through the House.

Sen. Ben Nelson, D-Neb., also praised pay/go and said it bodes well for passing a budget.

"There are always challenges...but if every effort is made to try to hold the line on spending, honor what the president has suggested, also what we just passed in the way of pay/go, it might be different," Nelson said.

However, Rep. Jim McGovern, D-Mass., a liberal Democrat, warned that these deficit reduction efforts could threaten programs to progressives.

"This is a tough year," McGovern said. "I don't want the burden to fall on people who are experiencing difficult times. We still have a hunger problem in this country too. I don't want nutrition and food programs cut."

Like Becerra, McGovern said that the defense budget should also be eligible for cuts in waste.

Meanwhile, Republicans were critical of the presidential deficit commission, raising questions of how effective it would be if they refuse to name members to it.

Under the agreement, the commission would have 18 members, including six lawmakers appointed by congressional Democrats and six lawmakers appointed by congressional Republicans. Obama would appoint six others, only four of whom could be Democrats. Fourteen commission members would have to agree on any deficit-reduction plan.

Senate Republican Conference Chairman Lamar Alexander of Tennessee called the commission "partisan," but said "we will have to wait and see" if Republicans cooperate.

Gregg agreed and added that even with commitments from Democratic leaders to take up the recommendations, there would be no guarantee of a vote in the Senate.

"There are another 99 people around here who have a lot of power, a lot of influence, and the capacity under the Senate rules to do what they want to do, and the Senate leader sometimes can't really affect that, even though they have made a commitment," Gregg said.