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BUDGET IMPASSE CONTINUES IN THE HOUSE OF REPRESENTATIVES: Moderates’ Push for Additional Domestic Spending Postpones Budget Vote

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“I made it very clear I think we need a budget, I want to get a budget, but I don’t have the votes for the budget,” House Majority Leader John Boehner (R-OH) said last week

For the last few weeks, many educators have kept tabs on Congress as it works to pass a budget resolution. Although it is a nonbinding spending blueprint that is not signed by the president, the congressional budget resolution sets limits on the spending and tax legislation that Congress will consider for the rest of the year. Only the total amount of discretionary spending in the final budget resolution is binding on the appropriations committees, but if current efforts to add additional funding to the overall spending cap are unsuccessful, some education programs could be squeezed during the appropriations process later in the year. It is for this reason that many education experts see the budget resolution as the first battle in the yearlong fight to obtain as much money as possible for education programs.

Early last week all signs pointed to the U.S. House of Representatives taking up its version of the congressional budget resolution by May 11 or 12. As the week inched forward, however, it became apparent that the House Republican leadership did not have enough support to pass the resolution, even after some accounting measures were used to add more money to domestic priorities such as education and health care.

“I made it very clear I think we need a budget, I want to get a budget, but I don’t have the votes for the budget,” House Majority Leader John Boehner (R-OH) said last week. After talks broke down on Thursday afternoon, Boehner declined to speculate on exactly when the measure could reach the House floor but said “the sooner the better.”

In an effort to garner additional support from Republican moderates, House Appropriations Committee Chairman Jerry Lewis (R-CA) agreed to shift $4.1 billion in increases for defense and foreign aid to programs funded in the Labor, Health and Human Services, and Education spending bill. However, many House moderates, including Representative Michael Castle (R-DE), continue to hold out for an increase of $7 billion, the amount that the Senate included in its version of the budget resolution when it agreed to an amendment by Senators Arlen Specter (R-PA) and Tom Harkin (D-IA).

“We just haven’t gotten to a point of agreement,” Castle said, following a series of meetings with House Republican leadership. “I have to give leadership credit, we have not had discussions like this often.” Castle added that he expected negotiations to continue into the week of May 15.

Even without a budget resolution in place, the House Appropriations Committee has already begun work on the fiscal year (FY) 2007 appropriations bills. On May 9, the committee agreed to an overall FY 2007 discretionary spending limit of $872.8 billion, an amount equal to President Bush’s budget proposal. At the same time, the committee approved a $141.9 billion discretionary allocation for the Labor-HHS-Education spending bill, which is $4.1 billion higher than the President’s request, but only slightly above the $141.1 billion allocated for FY 2006. Representative David Obey (D-WI), the Ranking Democrat on the House Appropriations Committee, offered an amendment that would have provided an additional $4.7 billion for the Labor-HHS-Education spending bill, but it was defeated by a party-line vote of 25 to 37.

While Chairman Lewis has declared his intent to pass all of the spending bills before July 4 to “avoid a massive omnibus budget package,”Senate Majority Leader Bill Frist (R-TN) is unlikely to schedule consideration of the FY 2007 appropriations bills until after the Independence Day recess. If Congress follows recent precedent, most spending decisions will be put off until after the November elections.

While the House and Senate can work without a budget resolution in place, negotiations on different versions of appropriations bills could prove difficult, especially as the Senate is on record in support of an $882 billion discretionary spending cap, or $9.2 billion more than supported by the House and President Bush.

 

Congress Passes $70 Billion Tax Cut Package

 

On May 12, Congress gave final approval on a $70 billion tax package that would extend President Bush’s 2003 tax cut on dividends and capital gains by 2 years, until 2010. The measure would also keep millions of Americans from becoming subject to the alternative minimum tax and provide a multitude of other benefits.

“Let me make it perfectly clear: This legislation is good news for working Americans and for the economy of this country,” said Senator Trent Lott (R-MS).

However, according to the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute, the middle 20% of earners will see an average tax cut of only $20. Meanwhile, the wealthiest Americans will receive the lion’s share of the cut, with the top 1% of earners receiving $14,100 in tax reductions and individuals earning over $1 million receiving $43,000. In total, about 87% of the tax benefits will go to the 14% of households with incomes above $100,000.

Republicans counter by saying that the tax cuts pay for themselves and help to grow the economy. They point to tax receipts that have surged to $1.35 trillion through April, an increase of $137 billion, or 11.2%, over last year. However, even with the additional tax revenue, tax policy experts argue that the current tax code is not sustainable. According to University of Michigan tax economist Joel B. Slemrod, the imbalance between tax collections and federal expenditures has flipped from a surplus to a deficit over the past 6 years. In 2000, federal revenues were $2.03 trillion, compared to $1.79 trillion in spending. This year, revenues are expected to reach $2.31 trillion while spending will hit $2.65 trillion, a deficit of $340 billion.

House Majority Leader Boehner has said that holding the line on spending while allowing tax cuts to stimulate the economy will help to close the gap. Other analysts disagree and say that the spending problem is not with discretionary programs such as education and health care, but with entitlement programs such as Medicare and Social Security, which are projected to grow by 23% through 2010.

“The economy has been fairly strong over the last few years, and that makes it harder to make the case that, in the short run, tax cuts inevitably lead to tax increases or spending cuts,” Slemrod told the Washington Post. “But I don’t think anybody disagrees that there are very large fiscal imbalances in the government. It’s very clear we’ve made no progress. In fact, we’ve made the problem worse.”

 

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