And You Thought Your Budget Was Difficult: Congress Debates Federal Finances

On Friday, June 25, 2004, the House voted down a Republican-sponsored proposal to limit federal spending. The vote was an overwhelming 286-146, since many Republicans joined Democrats to defeat the measure.

Something has to give - or does it?

This unusual difference of opinion within the Republican party on how to spend our tax dollars reflects the seriousness of the nation’s financial situation and highlights the philosophical differences in the United States both over what government is supposed to do and what creates jobs and job security.

President Bush believes in tax cuts for everyone, including the wealthy. His view is that wealthy people will take their extra money and create new businesses with it. He also believes that government should take less responsibility for people’s health and education and that individuals and private businesses should provide more of those services, rather than government.

In addition, there is open debate on how to protect or help people whose jobs disappear, either from new technology or from competitive workers in other much cheaper countries. And job growth has not yet reached many people.

The tax cuts were voted in before the war in Iraq began. Now there is less money coming into the government while the bills for the Iraq war keep growing. We are borrowing through bond sales to meet our goals, but it is now clear that something has to give. And this is an election year, when the entire House of Representatives and one third of the Senate must run for reelection.

Stop the spending? On health and education? This year?

The bill put forward by the Republican leadership in the House would have created spending caps for federal programs outside of defense and domestic security while leaving President Bush’s tax cuts in tact.

More specifically, the legislation made automatic and across-the-board cuts to federal programs if their cumulative budgets exceeded $821 billion in 2005 or $843 billion in 2006. However, the tax cuts, which could add $1.4 trillion to the deficit over the next 10 years, could still be extended.

Party discord

Several Republicans, such as Michael Castle of Delaware, disagreed with the proposal, saying that the tax cuts should not be overlooked when attempting to balance the budget.

In addition, Republicans on the House Appropriations Committee argued that the bill’s spending limits could violate the Constitutional balance of power among the branches. Since the White House Office of Management and Budget would be able to influence the spending caps, the bill would compromise Congress’ power of the purse.

This late-June dispute isn’t the first time in 2004 that Republicans have clashed on budget issues and ended up sinking a measure. Both House and Senate Republicans have been unable to pass a budget resolution for 2005, since party members have disagreed on rules that would require Congress to pay for new expenses with spending decreases and/or tax increases, a system known as pay-as-you-go or PAYGO.

Democrats’ proposal

The House also defeated a Democratic measure that would have repealed tax cuts to those with incomes of $1 million or more. The total worth of these tax cuts, $19 billion, would have gone to reducing the national debt as well as education, healthcare, and homeland security. This proposal was defeated 230-184.

The growing national debt

As of June 24, 2004, the national debt was $7.2 trillion dollars, a figure fast approaching the federal deficit limit of $7.4 trillion dollars. If the deficit surpasses this maximum, the U.S. may default on its loans, a consequence that Congressional Quarterly calls "catastrophic."

But default on government obligations is unlikely; Congress will simply raise the debt limit like they did in 2002 and 2003. In 2003, the House did not even vote on the issue; they raised the limit through the so-called Gephardt Rule, which automatically passes an increased debt limit through the House once a budget resolution is adopted.

But since the House has not yet passed the 2005 budget, it will have to raise the limit the good old-fashioned way - through legislation.

To the limit

WomenMatter continues to spotlight how ideas become legislation. Often bills are written to put a controversial plan into a bill with other expenditures that are more popular. The majority party most often gets to start the process as it controls the committee system.

In this case, the Republicans planned to increase the debt limit by attaching it to a military spending bill, but Democrats protested.

Democrats threatened a lengthy debate on the debt-limit issue, a tactic that would have stalled the military spending bill’s passage. Since Republicans weren’t willing to delay, they removed the debt limit increase from the spending bill, which passed shortly thereafter.

What’s next?

The debt-limit issue is politically charged, since the growing deficit is a problem that haunts all Republicans running for re-election. Since Republicans have control of The White House, the Senate, and the House, any accusation of budget mismanagement tends to fall on them. Therefore, Republicans want to avoid the issue and Democrats want to bring it to light.

Although their effort failed this time, Republicans are likely to add the debt limit increase to another bill. Senate Budget Chairman Don Nickles (R-OK) predicts that it will be on Bush’s desk before the election, and it may not even be necessary to pass it until after the election. The Treasury Department estimates that the government may not reach the $7.4 trillion limit until October 2004, and Congressional Quarterly reports that the Treasury has accounting methods that can keep the government operating beyond November.

What do you think?

When you think of your personal finances, what would happen if your credit limit were increased every time you approached your max? What if you had an expensive, ongoing financial emergency but did not cut spending or increase income in order to manage it?

When we look at the national financial situation in this way, can we see solutions? How did your representative vote?

Discuss this issue with other WomenMatter readers in one of our online forums. If Jobs, Taxes, and Benefits are important to you, sign up for an e alert and we’ll keep you posted.

Don’t forget to register to vote, find out how your representative voted, and contact your representative, because your voice matters.

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Article Posted on: 6/28/2004