Presidential Hopefuls to Vote on Budget

Associated Press
March 13, 2008

WASHINGTON (AP) -- Presidential candidates John McCain, Barack Obama and Hillary Clinton interrupted their campaign schedules to return to the Senate for votes on taxes and spending likely to become key points of contention in the race for the White House.

Votes on tax cuts and on a one-year ban on pet projects topped the Senate's agenda before an expected late-night vote Thursday to pass a $3 trillion Democratic budget blueprint. The nonbinding plan predicts a balanced budget in four years and promises generous increases for many domestic programs, but achieves those goals only by assuming major tax increases when President Bush's tax cuts expire in about three years.

Obama, D-Ill., and Clinton, D-N.Y., both promise to reverse Bush's tax cuts for wealthier taxpayers, but the Democratic budget they'll be voting for would allow income tax rates to go up on individuals making as little as $31,850 and couples earning $63,700 or more.

Across the Capitol, the House was to vote on a companion Democratic measure predicting larger surpluses while allowing $683 billion worth of tax increases over five years with the expiration of Bush's tax cuts.

A Republican alternative that largely mirrored a plan by presumptive GOP nominee McCain of Arizona to permanently extend Bush's tax cuts and eliminate the alternative minimum tax was expected to fail badly, with party moderates distancing themselves from the GOP plan's huge cuts in popular programs like Medicare, housing, community development, and the Medicaid health care program for the poor and disabled. Such cuts were needed to make room for big tax cuts and still project a balanced budget.

Congress' annual budget debate involves a nonbinding budget resolution that sets the stage for subsequent bills affecting taxes, benefit programs such as Medicare, and the annual appropriations bills. Unless such follow-up legislation is passed, however, the budget debate has little real effect and is mostly about making statements about party priorities.

This is such a year. Congress rarely tackles difficult budget issues as elections loom, and a standoff with Bush means that Democrats may even take a pass on advancing the 12 annual appropriations bills.

The rival budget plans display the difficult trade-offs facing the next president, who must weigh attempting to balance the budget with tax cuts that expire at the end of 2010 and spending programs popular with Democrats and Republicans alike.

The first year of an administration is typically when heavy lifting on the budget is done, but each candidate's campaign plans seem to overpromise what they can deliver. McCain's tax cuts would require a meat cleaver be applied to spending, while the Democrats promise spending plans that would enlarge the deficit or require too-large tax increases.

The White House forecasts the deficit for the current year at $410 billion, a near record.

On Capitol Hill, Democrats trumpeted their plan for putting the budget back in surplus while also making investments in infrastructure, education, community development, clean energy and other programs. It also avoids $196 billion worth of Bush-proposed cuts to Medicare and the Medicaid health care program for the poor and disabled.

Democrats in the House and Senate are divided on taxes. The House budget plan assumes elimination of the full roster of Bush tax cuts.

In the Senate, however, Democrats offered an amendment to renew tax cuts including the 10 percent tax bracket on the first $7,825 of income for individuals, the $1,000 per child tax credit, and estate tax relief. But the tax plan, offered by Sen. Max Baucus, D-Mont., would eat up virtually all of the planned surpluses, while allowing income tax rates to bounce back to pre-Bush levels, as would taxes on dividends and capital gains on stock and real estate sales.

Under both Democratic plans, tax rates would increase by 3 percentage points for each of the 25 percent, 28 percent and 33 percent brackets. At present, the 25 percent bracket begins at $31,850 for individuals and $63,700 for married couples. The 35 percent bracket on incomes over $349,700 would jump to 39.6 percent.

Senate Republicans countered with an amendment extending income tax cuts and current rates on investments, but the move would mean the budget would stay in the red, producing deficits of about $130 billion in 2012 and $160 billion in 2013.

The Democratic plans would provide generous, greater-than-inflation increases for domestic agency budgets. They both endorse Bush's even more generous $36 billion, or 7 percent, increase for the core Pentagon budget. ... ans1.shtml