Back to the Budget: Congress Quarrels over Cuts

Most of us have a budget. And when we spend beyond that budget’s parameters, we may go back and reduce expenditures. Hopefully, we just need to cut back on those $5 lattés instead of compromising essentials like food and healthcare.

Congress goes through the same process with the federal budget. Often, projected spending exceeds the limits set in the budget resolution, so committees have to go back and figure out where to cut. These spending decreases are proposed to the House and Senate in the form of a budget reconciliation bill, which is then accepted or rejected by Congress.

Reconciling spending

On November 3, 2005, the Senate agreed 52-47 to $36 billion in cuts, including reductions to entitlement programs that are usually protected from budget cutbacks.

Medicare and Medicaid would be cut by $10 billion over five years, the first reduction to these entitlement programs since 1997. Senators in favor of the bill claim that the cuts won’t affect beneficiaries, but rather pharmaceutical and insurance companies.

Specifically, fewer Medicare subsidies would be paid to insurance providers, and drug manufacturers would have to pay larger rebates to states’ Medicaid prescription drug programs.

But some Senators feel that the cuts could result in less comprehensive care for beneficiaries. Six Republicans joined Democrats to oppose the bill, including Olympia Snowe and Susan Collins of Maine, Norm Coleman and Mark Dayton of Minnesota, Mike DeWine of Ohio, and Lincoln Chafee of Rhode Island. Snowe and Collins explained that the reconciliation bill is not in line with their priorities and that they are strongly opposed to drilling in the Arctic National Wildlife Refuge (ANWR).

The bill allows for oil exploration in ANWR; the provision was included by drilling proponents because reconciliation bills cannot be filibustered. For more on the Arctic National Wildlife Refuge, click here.

House version

The House version of the reconciliation bill contains $54 billion in spending cuts, $18 billion more than the Senate. Much of that difference will come from cuts to food stamps. Fewer legal immigrants will be able to qualify, and applying will be more difficult for all.

The House is scheduled to vote on its version Thursday, November 10, and new House Majority Leader Roy Blunt (Missouri), who replaced Tom DeLay (Texas), has expressed confidence that it will pass.

However, a number of Republican Congresspeople are opposed to drilling in ANWR and may put up a considerable fight. Twenty-six House Republicans wrote a letter to Blunt, requesting that the ANWR provision be removed.

Tax context

The next item on the Republican agenda is a $60.2 billion tax cut package that will extend current tax provisions. The Senate will be first to try on the legislation, with Finance Chairman Charles E. Grassley at the helm.

Democrats are opposed to the cuts, claiming that they are fiscally irresponsible. They point out that $60 billion in tax cuts and $36 billion in spending cuts amounts to a greater deficit, not a savings. But Republicans believe that the cuts will stimulate the economy and therefore generate revenue.

But Democrats say that many of the cuts will affect only the wealthiest Americans, including the extension of a 2003 tax break on capital gains and dividends

For more on this philosophical debate, click here. Should we cut Medicare and Medicaid while lowering taxes? How would you reconcile the budget? What are your spending priorities at home? Do those priorities mirror your main concerns for the national budget? What is your philosophy on debt? What about taxes?

What do you think?

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Article Posted on: 11/9/2005