Congress Approves Big Bucks Budget

The U.S. Congress on Thursday approved a $2.6 trillion budget plan for next year that calls for new tax cuts and spending reductions over the next five years.

Republicans in the House of Representatives and Senate pushed through the budget blueprint without the support of a single Democrat.

Before final votes, Republicans and Democrats squabbled over whether this budget outline for the fiscal year beginning on Oct. 1 would set America on a path toward cutting U.S. budget deficits in half, as President Bush has promised, or whether it would add billions of dollars to already record budget deficits.

Bush praised Congress’ work, calling the product “a responsible budget that reins in spending to limits not seen in years.”

Among the key components are proposals for up to $106 billion in additional tax cuts over five years coupled with $35 billion in spending cuts over the same period.

Tax cuts could include the extension of lower capital gains and dividend tax rates. Details would be worked out later.

Included in the spending savings is a controversial plan to reduce the growth in funding for Medicaid, the health care program for the poor. The budget proposes $10 billion in savings over four years to the program that is run jointly by states and the U.S. government.

But some senators speculated that Congress might find a way to dock programs other than Medicaid, such as Medicare, a federal health care program for Americans over 65.

Senate Budget Committee Chairman Judd Gregg, a New Hampshire Republican, said the budget embraced by Republicans “essentially freezes discretionary non-defense spending over the next three years and does it with enforcement mechanisms which are pretty effective.”

Democrats countered that the plan would add $167.5 billion to U.S. budget deficits over five years.

They argued that budget deficits will swell in part because rising costs for the Iraq war are not included in Republican deficit estimates; nor are the costs of Social Security reform sought by Bush. Republican-backed tax cuts also would contribute to budget deficits, according to Democrats.

“Like the president’s budget, (Congress’) budget … cuts funding for key services such as Medicaid that Americans rely on,” said Rep. John Spratt of South Carolina.


Spratt, the senior Democrat on the House Budget Committee, said the budget also “makes room for new tax cuts likely to be targeted largely to those who need help the least.”

The Republican-controlled Congress failed last year to get a budget plan, making it harder to control spending that contributed to a record $412 billion budget deficit last year.

The new budget plan also advances Bush’s drive to allow oil drilling in the environmentally protected Arctic National Wildlife Refuge in Alaska. Although further legislation would be needed, language included in the budget could speed its passage.

Budget-deficit worries have been growing in Congress. Federal Reserve Chairman Alan Greenspan expressed his concern last week when he told lawmakers that continued deficits “would cause the economy to stagnate or worse.”

Besides Medicaid reductions, the budget proposal includes $3 billion in cuts to U.S. farm programs over five years and $6.6 billion in savings for a deficit-ridden federal program that insures corporate pensions.