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Sen. Harry Reid is pressing to add the rules to an unpopular bill that would permit the government to borrow a whopping $1.9 trillion to continue to finance its operations.
updated 1/25/2010 1:42:49 PM ET 2010-01-25T18:42:49

The top Democrat in the Senate is proposing tough new budget rules that would make it much more difficult for Congress to extend emergency unemployment benefits and health insurance subsidies for laid-off workers.

The tough anti-deficit rules being proposed by Majority Leader Harry Reid of Nevada would also make it harder to permanently extend some of the tax cuts that expire at the end of this year, though middle-class tax cuts would not be affected.

If approved, Reid's "pay-as-you-go" plan would likely have an almost immediate impact on Congress' free-spending ways by requiring spending cuts or revenue increases to pay for new spending initiatives or tax cuts.

That means, for example, the tens of billions of dollars it takes to extend unemployment benefits beyond the six months regularly permitted would have to be "paid for" with tax hikes or cuts to other benefit programs when the current extension expires at the end of next month.

Congress already lives within similar budget rules but routinely waives them. However, the new rules would carry the force of law and be enforced by the threat of across-the-board spending cuts if they are violated.

Reid is pressing to add the rules to an unpopular bill that would permit the government to borrow a whopping $1.9 trillion to continue to finance its operations. Yet he is a reluctant convert to the idea and did not speak on his amendment when introducing it late Friday afternoon.

The real force behind the tougher budget rules are House moderate "Blue Dog" Democrats, who insist on giving the pay-as-you-go rules the force of law. They have vowed to kill such a huge increase in the so-called debt limit unless it is accompanied by the new budget rules.

While arcane even in the Byzantine world of Washington, the rules could have a dramatic effect on policy. When similar rules were in place in the 1990s, they helped impose discipline on Congress and the White House that, advocates say, helped balance the budget in 1998. But those pay-as-you-go rules expired in 2002.

One difficult-to-negotiate issue for Reid has been the treatment of expiring policies involving Medicare payment to doctors, the estate tax, and the alternative minimum tax.

While an extension of middle-class tax cuts championed by President George W. Bush — including rate cuts and a larger child tax credit — would be exempt from the pay-as-you-go rules, others would get only a short-term reprieve.

Under an agreement between House and Senate Democrats, efforts to cut the estate tax and keep millions of middle-to-upper income filers from being hit by the alternative minimum tax would be exempt from the pay-as-you-go rules for just two years.

It will take 60 votes in the Senate to approve Reid's plan, a tall order since all but a handful of Republicans are likely to oppose it. They say it would be virtually impossible to enact new tax cuts.

The rules would not be foolproof, since Congress could waive them if they prove impossible to live within. That is what happened when Bush's tax cuts were passed in 2001.

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