* Republican, Democratic proposals not expected to pass
* But they will open new phase in deficit debate
By David Lawder and Mark Felsenthal
WASHINGTON, March 11 (Reuters) – With little prospect of
getting rid of the automatic spending cuts that kicked in on
March 1, the U.S. Congress and the White House will move on to
bigger budget battles this week as dueling Republican and
Democratic proposals land in the House of Representatives and
the Senate.
Neither budget plan is likely to be enacted. But the
proposals to be submitted by Republican Representative Paul Ryan
of Wisconsin and Democratic Senator Patty Murray of Washington
should frame the debate over the government’s taxing and
spending priorities for the next few months and possibly into
the 2014 Congressional elections.
The budgets from Ryan and Murray, who chair the budget
committees in the two chambers, are widely seen as wish-lists
unacceptable to the opposing party, underscoring the depth of
the fiscal divide.
Ryan plans to unveil on Tuesday a slightly modified version
of the budgets passed by the House in each of the past two
years, cutting spending by $5 trillion over a decade and
partially privatizing the Medicare health plan for retirees and
dismantling President Barack Obama’s healthcare overhaul law.
With the help of $620 billion in new tax increases on the
wealthy as a result of the January “fiscal cliff” deal, Ryan’s
plan aims to balance the budget by 2023, compared with 2040 in
his last year’s proposal. But further tax increases are out of
the question, he said on Sunday.
Murray has signaled that her budget will aim to give the
economy some breathing room to allow faster growth in the next
few years, while maintaining social safety net programs and
making critical investments in education and research.
Her budget is not expected to achieve balance as Ryan’s
does, but will aim to shrink deficits down to a sustainable
level that will allow debt as a percentage of the economy to
start declining.
The plan will get there by eliminating some of the estimated
$1 trillion in “tax expenditures” – subsidies paid through tax
deductions, credits and other exclusions. Based on Murray’s
comments and recent Senate Democratic proposals to replace the
automatic cuts, these loophole closures will focus on the
wealthy.
“At a time when we absolutely must cut where we can, looking
at ways we can close special tax breaks that aren’t targeted to
help the middle class or our economy just makes sense,” Murray
told a Senate Budget Committee hearing last week.
“There’s no good reason, for example, that taxpayers
currently subsidize millionaires more, when they purchase a
second home, or a yacht, than they do middle-class families
purchasing their first home.”
Many Republicans, including Ryan, also want to close these
loopholes, but they want to divert the savings to reduce tax
rates. This sort of comprehensive tax reform, they argue, will
create a simpler, cleaner tax code that will foster economic
growth.
The budget proposals will focus on the 2014 fiscal year that
starts on Oct. 1, leaving in place the first $85 billion in
automatic cuts – called the “sequestration” – at least for the
time being.
A Senate Democratic bill to fund the government through the
end of the current fiscal year will make no effort to replace
the cuts, focusing instead on ways to grant agencies authority
to better manage their expenditures.
“We know that coming up with the $85 billion to solve
sequester has to be done at the leadership and presidential
level,” the bill’s author, Senate Appropriations Committee Chair
Barbara Mikulski of Maryland, said last week.
The White House on Monday acknowledged that elimination of
the across-the-board spending cuts will likely come only as part
of a larger, comprehensive budget deal with Republicans, many of
whom are determined to keep the $85 billion in savings.
“So, our focus now, as the president has said, is on working
with Congress” on the regular budget process, “and through that
process hopefully produce a bipartisan agreement on deficit
reduction,” White House spokesman Jay Carney told reporters.
NEW STARTING LINES
The week marks “a transitional moment” for Congress, said
one aide, because it represents a return to the normal
legislative process of considering budget resolutions in both
chambers.
For more than two years, Washington has lurched from crisis
to crisis amid “leadership-brokered” deficit deals and stop-gap
spending extensions.
The Democratic-controlled Senate has not passed a formal
budget resolution in nearly four years.
By returning to so-called “regular order,” the
Republican-controlled House in particular aims to engage more
lawmakers in the process of deciding how to cut deficits so that
there is more support among rank-and-file members for the
finished product.
The last two major deficit deals were reached at the last
minute at the highest levels of the White House and Congress,
staving off a potentially devastating debt default in 2011 and
averting a massive tax increase on Jan. 1.
Obama will continue his efforts to engage congressional
Republicans and Democrats directly, by holding meetings with
lawmakers this week.
Obama’s shift to a “charm offensive” in dealing with members
of Congress likely reflects a sense of public weariness from
endless budget battles, said Steve Bell, a former staff director
of the Senate Budget Committee and now with the Bipartisan
Policy Center, a Washington think tank.
“It’s important to change the subject away from debts and
deficits and instead talk about things where you can make
progress – immigration reform, for example, or on guns,” Bell
said.
With the effects of the automatic spending reductions yet to
fully kick in, the president may be counting on public pressure
to build on for an alternative to the deep cuts, Bell said.
In the meantime, the president can establish links with
members of Congress of both parties and work on other issues.
