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Budget Negotiators Begin Conference to Close Spending Gap

APRIL 6, 2005 – With the two chambers, and factions of their party, still sharply divided over spending cuts, the top House and Senate budget writers met Wednesday morning to begin informal conference negotiations.

Rep. Jim Nussle, R-Iowa, and Sen. Judd Gregg, R-N.H., will have to come up with a number—and anticipated policy—that will satisfy House conservatives and moderate Republicans in the Senate.
The House budget blueprint calls for $68.6 billion in mandatory spending cuts over the next five years, about four times the $17 billion outlined in the Senate budget.

Budget experts say a small difference in the budgets' discretionary spending caps will be easily resolved and that the two sides are not too distant on tax cuts.

A floor amendment by Sen. Jim Bunning, R-Ky., raised the amount of tax cuts the Senate would protect from filibuster through the reconciliation process from $70 billion to $129 billion. But observers say the House and Senate are likely to negotiate between the $70 billion figure and the House's call for $45 billion in tax cuts under reconciliation. The overall House tax target, including cuts outside of reconciliation, is $106 billion.

For now, few in either chamber are drawing lines in the sand, but the gap on the spending side is significant.

The biggest difference between the two chambers' instructions to their authorizing committees to generate cuts in mandatory spending programs is an $18.7 billion assignment to the House Ways and Means Committee, which has jurisdiction over Social Security, Medicare, unemployment insurance, and the Supplemental Security Income program in addition to its command of the tax code.

Nussle has said that Ways and Means will generate some of its savings from cuts to the earned income tax credit (EITC), but Senate GOP aides says any such savings would generate perhaps $3 to 5 billion over five years while creating a parliamentary snag that could imperil GOP leaders' plans to advance tax cuts and spending reductions as separate bills.
House conservatives argue that the major entitlement programs must be changed.

Rep. Jeb Hensarling of Texas, the conservative Republican Study Committee's point man on budget issues, said that "unless we reform" Social Security, Medicare, and Medicaid, they will become the "three horses of the fiscal apocalypse."

Parliamentary problems bedevil efforts to advance the Bush administration's plan to shore up the financially troubled Pension Benefit Guaranty Corp. (PBGC) as part of the budget reconciliation process, though Senate GOP budget aides insist a modest plan by Gregg to generate about $5 billion in PBGC-related savings—only $2 billion or so via reconciliation—will pass muster with Parliamentarian Alan S. Frumin.

The obscure parliamentary situation arises because changes to both the EITC and PBGC premiums generally have effects on both outlays and revenues, which means any bill that includes changes to the programs is considered both a tax and spending measure. Since Frumin has opined that only one of each—tax and spending bills—can advance via the filibuster-proof budget reconciliation process, doing either policy in the first reconciliation bill would mean that both reconciliation slots would be used up and that there would not be a second bill.

"On PBGC—as with refundable tax credits, EITC, and other programs that involve both outlays and revenues—the Republicans' desire to have multiple reconciliation bills causes them a great deal of procedural difficulty," said a top Senate Democratic budget aide.

Republicans want separate tax and spending cut reconciliation bills in large measure because they do not want to mix in cuts to the Medicaid health care program for the poor or to the EITC program with tax cuts on dividend and capital gains income

"The optics of it are terrible," said an aide to a leading House GOP moderate.

But another House Republican aide said that is not an issue for conservatives.

"I don't think a lot of the conservatives are terribly concerned about those optics," the aide said. "Generally, conservatives view tax relief as being good anytime."
On another front, the Senate would like to use reconciliation to address the statutory debt limit without the possibility of a filibuster and extended debate on the debt. But the House has an automatic mechanism for passing a debt-limit measure upon adoption of the conference report on the budget. That allows lawmakers to avoid a politically difficult roll call vote on whether to allow for increased debt. A reconciliation bill would force a vote in the House.

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