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Senate Democrats rewrite budget plan

Senate Democrats are striving to stay united during debate on a $2.9 trillion budget outline for 2008 that already has tested their fragile majority.
/ Source: The Associated Press

Senate Democrats are striving to stay united during debate on a $2.9 trillion budget outline for 2008 that already has tested their fragile majority.

Moderate Democrats favoring tax cuts have forced a rewrite of the plan, pushing through an amendment Wednesday that would pave the way to extend a variety of popular tax cuts that are to expire at the end of the decade.

Across the Capitol, House Budget Committee Democrats held ranks in resisting a GOP-led drive to keep alive tax cuts enacted during President Bush's first term but scheduled to expire in 2010. The Democratic-led budget panel worked into the night toward a party-line vote, though debate by the full House next week promised to be a sterner test.

Both House and Senate Democrats acknowledged that it was likely many of the tax cuts would be extended - particularly those aimed at the middle class.

Plan would erase predicted surplus
In the Senate, the changes to the Democrats' $2.9 trillion budget outline would cover close to half the cost of extending the expiring tax cuts and were aimed at sealing support from moderates for the nonbinding but symbolically significant blueprint.

The plan, however, also would erase a $132 billion surplus predicted to appear in five years.

The tax cut amendment, approved 97-1, won the support of every Republican. Democrat Russ Feingold of Wisconsin was the only senator voting against it.

The vote came on a plan by Senate Finance Committee Chairman Max Baucus, D-Mont., to devote $180 billion in 2011-12 to preserve tax cuts aimed at the middle class. That included relief for married couples, people with children and people inheriting large estates.

After Baucus' plan passed, Democrats united to kill a bid by Sen. Jon Kyl, R-Ariz., to extend further cuts on taxes on estates as well as cuts on capital gains and dividend income that Republicans credit for jump-starting the economy when the cuts were passed in 2003.

In any event, the Democratic-controlled Congress, like its GOP predecessors, is not expected this year to follow up with binding legislation that would extend the expiring tax cuts.

It is commonly assumed that lawmakers will re-examine the tax cuts after the 2008 presidential election, with the outcome depending on the balance of power in Washington and on the fiscal outlook at that time.

House to follow suit
Like the Senate measure, the companion House Democratic plan would award big spending increases to domestic programs, including homeland security, veterans' health care and aid to local schools.

It assumes Bush's tax cuts indeed disappear and, as a result, would produce a $153 billion surplus in five years through more money coming into the treasury.

Republicans condemned the Democratic budget plan for its spending increases and its assumption that the lower taxes on income, married couples, inheritances and investments would expire.

"The best way to balance the budget is to control spending, not raise taxes," said the House committee's top Republican, Rep. Paul Ryan of Wisconsin.

Despite much debate over taxes, the immediate impact of the House and Senate budget blueprints for next year is to award increases above inflation to domestic agencies for the portion of their budgets passed each year by Congress.

The Senate's plan would give nondefense programs an $18 billion increase, about 4 percent. The House measure proposes a $25 billion increase, almost 6 percent.

Even so, Democrats are eager to pass a budget, regarding it as an important test of their ability to govern. Republicans failed to pass a budget last year and action on critical spending bills stalled.

At the same time, the budget plans would cement promises by Democrats to require legislation cutting taxes or increasing spending on Medicare or a children's health insurance program to be "paid for" with new taxes or spending cuts elsewhere to avoid adding to the deficit.