GOP Leaders Reach Tentative Deal on Budget

04/28/2005

WASHINGTON (AP) - Top congressional Republicans reported agreement Thursday on a budget that envisions $10 billion in Medicaid reductions over the next five years and at least $70 billion in tax cuts.

The plan could also open the way to oil drilling in Alaska’s Arctic National Wildlife Refuge.

Congressional officials said the agreement envisions spending of about $2.6 trillion for the fiscal year that begins Oct. 1, with a deficit of $382 billion.

Republican officials said the plan relies on savings from farm, student loan and pension programs to achieve President Bush’s goal of cutting deficits in half over five years.

House and Senate GOP leaders said they would push for a vote later in the day. Senate Majority Leader Bill Frist, R-Tenn., expressed optimism that he had enough votes to pass the budget in the Senate.

Even before they formally unveiled the agreement, Democrats hastened to attack it. “It will add to the deficit, it won’t diminish the deficit,” said Rep. John Spratt of South Carolina, the senior Democrat on the House Budget Committee.

The budget blueprint itself is nonbinding and does not require Bush’s signature. At the same time, it anticipates that Congress will enact follow-up legislation to implement its goals.

Overall, officials said the agreement envisioned savings of roughly $35 billion over five years from federal benefit programs. If implemented, it would mark the first time since 1997 that lawmakers have looked to this type of program for savings.

The largest single portion of the $35 billion would come from Medicaid, which provides health care for low-income Americans, officials said. Up to $6.6 billion in deficit reduction would come from federal pension programs, including higher fees paid by employers. About $3 billion would come from agriculture programs.

In political maneuvering over the issue this year, Democrats have repeatedly accused Republicans of planning cuts in the program. Republicans respond that despite the anticipated curbs, overall Medicaid spending would rise annually from current levels.

GOP leaders have been haggling for days in hopes of nailing down an agreement before the Senate begins a weeklong break on Friday. Officials said leaders in both houses were checking with members of the rank and file before sealing their agreement, to make sure they would be able to pass it.

Under arcane congressional rules, budget legislation is filibuster-proof in the Senate, meaning that supporters need only 51 votes to pass related spending and tax measures. Republicans hold 55 seats in the Senate, and even with defections could prevail on a 50-50 tie vote. Two officials said there was concern among House GOP leaders, fearing defections from conservatives who want even deeper deficit reductions.

Once passed by both houses, the agreement would automatically trigger a requirement for Congress to begin work on legislation implementing savings from benefit programs as well as cuts in taxes.

Senate Republicans favor including a provision opening a portion of the wildlife refuge in Alaska to drilling. House GOP leaders favor drilling, and have incorporated it into separate energy legislation.

Overall, the spending plan envisions about $106 billion in tax cuts, officials said, about $70 billion of which can be protected against a filibuster.

Options include extension of a federal tax deduction for state sales taxes paid, as well as lessening the impact of the alternative minimum tax on upper middle income taxpayers.

Some Republicans also want to cut taxes on capital gains or dividend taxes.

Earlier proposed agreements had called for $40 billion in savings from benefit programs, and it was not clear why negotiators decided to reduce the total to $35 billion.

Much of the controversy had surrounded Medicaid. The House initially voted to trim up to $20 billion from anticipated Medicaid spending. In the Senate, though, Sen. Gordon Smith, R-Ore., led a successful effort to strip out all the savings from the health care program.

In negotiations that involved the White House, Republican leaders in the two houses eventually closed in on a compromise of $10 billion.

Smith posted a last-minute objection on Wednesday, and his office did not immediately respond to a request for comment on the tentative agreement.