March 10, 2004

March 10, 2004 | WebMemo on Federal Budget

Senate Rejects Spending Controls

The Senate is poised to pass a budget resolution that lays the groundwork for substantial tax increases while avoiding even minimal cuts in spending.

One Step Forward...

The Senate Budget Committee on March 4 approved a budget resolution that took a positive first step towards fiscal sanity. Under the leadership of Chairman Don Nickles (R-OK), the Budget Committee's budget resolution, if enacted, would:

  • Assure that legislation preventing tax increases for parents, married couples, and low-income earners would be protected from a filibuster;
  • Cap 2005 discretionary spending at $814 billion, a 3.3 percent increase over 2004; and
  • Call on Senate committees to weed out waste, fraud, and abuse in their mandatory programs.

...Three Steps Back

But with the budget resolution now being debated on the Senate floor, all three of these provisions are in danger. It appears possible that the full Senate could:

  1. Block efforts to keep tax cuts in place. Unless lawmakers act this year, the child tax credit will be reduced, the marriage penalty reinstated, and the 10 percent income tax bracket will be increased to 15 percent. The Senate Budget Committee sought to prevent a minority-led filibuster by including reconciliation instructions for extending these tax cuts. Some reports suggest the Senate may remove these reconciliation instructions, which means extending these tax cuts would require 60 votes rather than a simple majority.

    In addition, aproposal by Senator Russ Feingold (D - WI) would bring back the PAYGO requirement that all new tax cuts and mandatory spending increases be offset by equivalent spending cuts in mandatory programs like Medicare or Social Security, or other tax increases. Note that these restrictions were not in place last year when Congress enacted the huge Medicare drug bill - the largest mandatory spending expansion in forty years. But now that the debate has shifted from spending increases to tax cuts, Senators are suddenly demanding offsets. And given Congress' resistance to mandatory spending cuts - they cannot even agree to cut waste, fraud, and abuse - this legislation would virtually guarantee that most of the recent tax cuts would expire and Americans would see substantial tax increases over the next decade.
    UPDATE: The Feingold Amendment was agreed to, 51-48.

  2. Increase 2005 discretionary spending from $814 billion to $821 billion. This 4.3 percent increase over 2004 levels would be on top of the 39 percent increase these programs received over the previous three years. It is also $7 billion more than the 2005 discretionary spending cap the Senate enacted just a year ago. While lawmakers argue that the additional spending is needed for defense, they should take a cue from millions of families by balancing high-priority spending increases with cuts in lower-priority programs.
    UPDATE: This amendment, offered by Senator John Warner (R-VA), was agreed to, 95-4.

  3. Reject calls to eliminate waste, fraud, and abuse in mandatory programs. Mandatory spending is growing by 7 percent annually, and is projected to overwhelm the federal budget when the baby boomers retire. Yet Senator Nickles' modest proposal to cut $3 billion in waste from these programs may not survive the Senate debate.
    UPDATE: This amendment, offered by Senator Max Baucus (D-MT), was agreed to, 53-43.

Brian Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

About the Author

Brian M. Riedl Grover Hermann Fellow in Federal Budgetary Affairs
Thomas A. Roe Institute for Economic Policy Studies