ASSOCIATED PRESS
Democrats controlling Congress are leaving tough decisions on automatic tax increases to the next president and the newly elected Congress under a freshly negotiated House-Senate blueprint for the upcoming budget year.
The fiscal 2009 budget plan worked out in private talks between House Budget Committee Chairman John M. Spratt Jr. of South Carolina, and his Senate counterpart, Kent Conrad of North Dakota, awards an approximately 4 percent increase on average to nondefense Cabinet budgets passed by Congress each year. But it makes no effort to rein in the rapidly rising cost of federal benefit programs such as Medicare.
Mr. Conrad told reporters yesterday that he anticipates the nonbinding budget plan would pass both the House and Senate by the end of next week. He declined to reveal key details.
On taxes, the measure assumes that many of President Bush’s tax cuts will expire as scheduled at the end of 2010, and relies on a resulting influx of tax revenues to produce a small budget surplus in four years.
Mr. Conrad said the compromise budget retains a Senate plan to renew tax cuts aimed at the middle class, including the $1,000-per-child credit, relief from the marriage penalty, estate-tax cuts and the 10 percent tax rate on the first $7,825 of income for individuals.
But there’s not enough money to extend cuts on income-tax rates, capital gains and dividend income and still produce a surplus under the Democratic plan, which rejects Mr. Bush’s proposed cuts to domestic programs.
Congress’ annual budget debate involves a nonbinding resolution that sets the stage for later 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 Mr. Bush means Democrats may even take a pass on advancing the 12 annual appropriations bills.
The next president, on the other hand, will have no choice but to confront an enormous fiscal dilemma, starting with a deficit likely to exceed $400 billion and scheduled automatic increases in taxes on income, investments, large inheritances, married couples and people with children.
The first year of an administration is typically when heavy lifting on the budget is done, but all the candidates’ campaign plans seem to promise more than they can deliver, especially considering the entrenched budget deficit and the huge cost to the Social Security and Medicare programs of the retirement of the baby boomers.
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