Obama Budget
J. Scott Applewhite  /  AP
President Barack Obama, accompanied by Sen. Amy Klobuchar, D-Minn., arrives on Capitol Hill in Washington to meet with senators to discuss his budget.
NBC News and news services
updated 3/25/2009 6:56:57 PM ET 2009-03-25T22:56:57

In a springtime show of unity, congressional Democrats unveiled budget blueprints Wednesday that embrace President Barack Obama's key priorities and point the way for major legislation this year on health care, energy and education.

Even so, both the House and Senate versions lack specifics for any of the administration's signature proposals. And Democrats decided to cut spending — and exploding deficits — below levels envisioned in the plan Obama presented less than a month ago.

Administration officials and congressional leaders said any differences were modest.

"This budget will protect President Obama's priorities — education, energy, health care, middle class tax relief and cut the deficit in half," Senate Majority Leader Harry Reid, D-Nev., said after the chief executive met privately in the Capitol with rank-and-file Democrats.

Earlier, White House Budget Director Peter Orszag told reporters the congressional budgets "may not be identical twins to what the president submitted, but they are certainly brothers that look an awful lot alike."

Less money for future tax cuts
Neither house included the $250 billion that the administration seeks for any future financial industry bailout. Additionally, Senate Democrats assume in their version that Obama's middle class tax cuts will expire after 2010, and the House blueprint allocates $200 billion less to tax cuts over five years than the president.

But none of that means the tax cuts can't be kept in place in 2011 and beyond, only that lawmakers would have to find offsetting revenue to pay for them, said Kent Conrad of North Dakota, chairman of the Senate Budget Committee.

While the Senate version is supportive of most of the president's programs, it stops well short of endorsing the administration's tactics for enacting them into law. For example, the Senate budget supports the broad idea of a health care reserve fund, but it doesn't make assumptions about how to pay for it, or even how much of it should be paid for, NBC's Ken Strickland reported.

"We didn't exclude or include. What we did was leave open to the committees of jurisdiction maximum flexibility to make these judgments," Conrad said.

The House and Senate plans both call for spending $3.6 trillion in the year that begins Oct. 1, according to the Congressional Budget Office, compared with $3.7 trillion for Obama's plan.

The House plan foresees a deficit of $1.2 trillion for 2010 but would cut that to $598 billion after five years. The comparable Senate estimates are $1.2 trillion in 2010 and $508 billion in 2014.

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Obama's budget would leave a deficit of $1.4 trillion in five years' time, according to congressional estimates, a level that is viewed by numerous experts as unacceptable over time if the economy is to recover and remain healthy.

Greeted with criticism
Given the strong Democratic congressional majorities in both houses, there is little or no doubt the spending blueprints can clear both houses by the end of next month. But Republicans greeted them with criticism nonetheless.

In the House, Rep. Paul Ryan, R-Wis., said Democrats were advancing "the president's high-cost, big-government agenda in camouflage. ... Instead of simply righting the ship, this budget steers it in a radically different direction straight into the tidal wave of spending and debt that is already building."

Ryan, who is the senior Republican on the House Budget Committee, and GOP colleagues are expected to unveil an alternative on Thursday. No similar effort is expected in the Senate.

While the budget outlines are non-binding blueprints spelling out the parameters of implementing subsequent legislation, those written assumptions give Congress clear guidance on how to move forward on things like spending, taxes, and even policy, NBC's Strickland reported.

But because Conrad did not make concrete recommendations about cost, it could be argued that he's rejecting the president's budget, Strickland said. On the other side of the argument, budget Democrats argue their budget does not prohibit Congress from following through on the president's plans.

Health care reserve
At the end of the day there can still be a $600-billion health care reserve, that's paid in part by reducing itemized deductions. And there could still be a "cap and trade" program — Obama's controversial system for auctioning permits to emit greenhouse gases — that pays for making Obama's tax cuts permanent.

Conrad said, "We have made it possible for the committees of jurisdiction to do what the president is asking for on climate change, to do what asking for healthcare, on energy, and education."

Writing the budget this way achieves certain goals, Strickland said. First, it keeps Democrats from backing themselves into a corner because some of them don't support all of Obama's proposals — there's wiggle room for compromise later on tough issues. And second, by not committing to hard numbers — numbers in the billions — Conrad's budget may be seen as more fiscally responsible and producing larger deficit reductions.

In reality, the budget is largely a nonbinding statement of targets for lawmakers to meet as they look ahead to the next fiscal year. No presidential signature is required, since it is not legislation.

At the same time, the budget sets limits on overall domestic spending and on defense and — perhaps equally important — anticipates later legislation on health care, energy and education.

The House budget, for example, would establish fast-track rules for legislation the White House wants for remaking the nation's health care system, as well as for another measure to have the government begin making loans directly to students.

Deficit-neutral special accounts
Both budgets also would create deficit-neutral special accounts that will be used to pay for Obama's signature initiatives, a step that Orszag specifically noted in his comments to reporters as a key element of the administration's own budget.

Nor were Democrats willing to let Republican charges go unanswered.

"President Bush has left President Obama a hard hand to play: an economy in crisis and a budget in deep deficit, in deficit this year alone by $1.752 trillion," said Rep. John Spratt, D-S.C., chairman of the House Budget Committee.

Video: Biden, Pelosi on budget "President Obama has responded with a budget that meets the challenge head-on."

Democrats also made several decisions that reflect their priorities and mark a major change from those favored by the Bush administration and Republicans.

Each of the two houses' plans envisions substantial increases in non-defense domestic programs over the Bush administration's final year — $35 billion in the case of the Senate and $42 billion for the House — although both are smaller jumps than the administration's figure of $49 billion. Those differences are relatively modest in the context of spending of $500 billion or more on the programs involved.

Obama's core defense budget embraced
Both House and Senate are embracing Obama's core defense budget, granting a 3.8 percent increase and endorsing his assumption of $50 billion annually for wars in Iraq and Afghanistan despite the administration's pledge to wind down the Iraq conflict over 18 months.

On taxes, the Democrats followed Obama's lead in agreeing to extend many of the Bush-era tax cuts that were enacted in 2001 and 2003. An exception was made in the case of cuts that applied to upper-income wage earners. The budget envisions rolling them back in 2011, after an economic recovery is presumed to have taken hold.

Still, the administration appeared sensitive to the perception that the president's key tax cut proposal might be ended in two years.

Orszag announced that an administration board headed by former Federal Reserve Chairman Paul Volcker would have until December to study the issues of tax simplification, closing tax loopholes and reducing "corporate welfare." The result could be to make additional revenue available that might close the deficit, pay for Obama's tax cuts in the future, or both.

NBC's Ken Strickland contributed to this report.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Obama fights uphill budget battle

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