updated 4/29/2005 12:10:10 AM ET 2005-04-29T04:10:10

Congress narrowly passed a $2.6 trillion budget Thursday that would cut back spending on the Medicaid health care program for the first time since 1997 in a step toward trimming federal deficits.

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The Senate voted 52-47 to approve the blueprint of tax and spending priorities just hours after the House passed it by a similarly close 214-211. The budget instructs lawmakers to freeze or shrink spending in many domestic programs outside defense and homeland security and restrain farm, student loan, pension and some other government programs that grow automatically from year to year.

House Majority Leader Tom DeLay, R-Texas, said it’s time to look closely at benefit programs that are “popular but rife with waste.”

“These entitlement programs deserve reform,” he said. “The Medicaid system is antiquated and the quality of care is not being brought to the people that need it.”

The budget sketches out plans and priorities for spending $2.6 trillion in the fiscal year that begins Oct. 1, projecting a federal deficit of $383 billion. Lawmakers use the blueprint to pass specific tax and spending legislation later in the year.

After the House vote, President Bush praised the budget resolution. “This is a responsible budget that reins in spending to limits not seen in years,” he said in a written statement.

‘Missed opportunity’
Democrats renounced the proposed cuts.

“This budget is a missed opportunity because instead of being a blueprint of positive initiatives for the future, this budget is an assault on our values,” said House Democratic leader Nancy Pelosi of California.

Republicans said the plan to shrink federal spending only nicks rapidly growing benefit programs, which will continue growing but at a slightly slower rate.

Sen. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, committed not to eliminate coverage for the needy and disabled Americans covered by Medicaid, the health care program run jointly by state and federal governments.

“Doing nothing is far worse for Medicaid beneficiaries,” Grassley said.

Democrats expressed skepticism about GOP promises and questioned the budget’s projections of shrinking deficits.

“This budget says the lives of poor mothers and poor children are not that important after all,” said Sen. Edward Kennedy, D-Mass. “Under this budget, tax breaks for the rich are more important than life itself.”

The budget would shave automatically increasing benefit programs by $35 billion over five years while also cutting taxes by as much as $106 billion over the same period.

Medicaid gets marked for a $10 billion reduction over four years. The changes in Medicaid wouldn’t begin until 2007, giving a specially convened commission and the nation’s governors time to recommend cost-saving proposals.

Without any change, the Congressional Budget Office expects the federal government to spend $191 billion on Medicaid next year and more than $1.1 trillion over the five years covered by the budget.

Sen. Gordon Smith, R-Ore., who held Republican leaders in protracted negotiations over the size of Medicaid reductions, ultimately backed the plan.

Oil drilling
“Those who care about Medicaid, those who are served by Medicaid, be engaged and know that my office, my heart, my mind are open to you to do this right and not just to do this fast,” Smith said.

Smith said he’s working with the White House to assemble an advisory panel to recommend one round of changes by Sept. 1 and issue a final report for comprehensive restructuring in December 2006.

The budget could also pave the way for opening Alaska’s Arctic National Wildlife Refuge to oil drilling. In past years, the drilling authorization has died in the Senate because of a filibuster threat. The budget resolution protects future bills from filibuster, giving lawmakers an opening to authorize drilling without that obstruction.

In addition to planned reductions in projected Medicaid spending, it directs lawmakers to cull about $3 billion from agriculture programs and as much as $6.6 billion from federal pension programs, including higher fees paid by employers.

Government programs with budgets set annually by lawmakers would get a total of $843 billion next year, a 2 percent increase that’s in line with a strict budget proposed by the president.

Republicans stressed that the budget would put the government on a course of cutting the deficit in half, from $521 billion in fiscal 2004 to $254 billion in fiscal 2008.

The budget directs lawmakers to prepare their legislation for tax cuts and deficit-reducing changes by Sept. 16, to be completed with an item paving the way for increasing the legal limits on the national debt.

Under congressional rules, tax and spending legislation passed under direction from the budget is immune from filibuster delays in the Senate. Republicans hold 55 seats in the Senate and would need 51 votes to pass the related tax and spending measures.

The budget directions protect about $70 billion of $106 billion in tax cuts from filibuster. Options include extensions of many expiring tax breaks, such as changes to prevent the alternative minimum tax from encroaching closer to the middle class.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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