- The Washington Times - Wednesday, April 5, 2006

Last April, Congress hammered out the details of the fiscal 2006 budget resolution - a five-year fiscal blueprint laying out the broad parameters of federal spending and tax policies. More than 12 months later, a big piece of that plan — the part dealing with tax policy — is still on the drawing board, bogged down by a complicated parliamentary snag in the Senate. Congressional negotiators are trying to overcome this hurdle and may have an agreement as early as tomorrow. But at this writing the outlook is still cloudy.

Political forecasters agree President Bush and his congressional allies have faced some foul weather since Hurricane Katrina wreaked havoc on the Gulf Coast last summer and created its own political storm in Washington. Yet the continuing strong performance of the economy offers powerful rays of sunshine. As Mr. Bush has stated repeatedly, America has added almost 5 million new jobs in the last two years. Our unemployment rate is now 4.8 percent — lower than the average of the 1970s, 1980s and 1990s, real after-tax income is up 8 percent per person since 2001 and consumer confidence is at its highest level in nearly four years.

Overcoming the procedural hurdles and pulling Republicans together on an economic policy victory could provide the White House and Republican lawmakers with a much-needed shot of political adrenaline as they move toward the 2006 elections.

Pro-growth tax policies work, and if Americans vote their pocketbooks this November they should return a Republican majority to Congress based on the GOP’s economic record. Conversely, an economic downturn could be just what the Democrats need, putting enough seats in play to capture the majority in both bodies. Failure to extend tax cuts enacted in 2003 on dividends and capital gains could create such a downturn.

And that’s exactly what might happen. The legislation has been stalled due to behind-the-scenes wrangling about the interpretation of the so-called Byrd Rule. And as it stands now, the Senate may require a super-majority 60 votes to extend these tax cuts for even two more years — even though Republicans intended this measure to move in a procedurally protected legislative vehicle called reconciliation, which was supposed to require only a simple majority for passage.

First adopted in 1985, the Byrd Rule is a complicated provision aimed at keeping extraneous items out of procedurally protected (cannot be filibustered and can pass with 51 votes) reconciliation bills in the Senate. It also requires 60 votes if a law “would increase the deficit for fiscal years beyond those covered by the reconciliation measure.” How we got to this point underscores the notion of the New Republic’s Ryan Lizza that “parliamentary procedure is destiny,” so please put on your green eyeshades.

Last year’s budget resolution, hammered out between the House and Senate, provided for $70 billion in further tax cuts protected under the reconciliation process — enough money to extend the capital gains and dividends reductions set to expire at the end of 2008 for two more years. In contrast to the 2001 and 2003 tax reconciliation bills, which were 10-year measures, fiscal and political constraints caused Republicans to craft a five-year budget (2006-10). They reasoned that if the tax cuts were simply extended for two years, to 2009 and 2010, within the context of a five-year budget (2006-10), the Byrd Rule would not come into play.

Yet the Joint Tax Committee scored the 10-year revenue effects of this five-year budget and showed the legislation increased the deficit in the so-called out-years (outside the five-year budget), triggering a Byrd Rule point of order and the 60-vote threshold. Some House and Senate Republicans strongly disagreed, reasoning the tax bill covered only a five- year period. But the parliamentarians ruled the legislation did increase the deficit in the out-years, so the legislation is stuck — needing to get scaled back or mustering 60 votes.

Fixing the budget problem can be accomplished in several ways, including adding other tax provisions that Democrats support, scaling back the tax plan or finding other offsets. But whatever the small fix, Mr. Bush now has a big opportunity to lead, bringing Republicans together and exposing the Democrats’ attempts to block the legislation for raw political advantage.

Yet Republicans and Mr. Bush should conclude the tax battle quickly, before leaving for the Easter break if possible. Doing so unifies the party and energizes the Republican base — all critical tasks as the 2006 midterm election approaches. Giving Republicans a unifying issue that also strengthens the economy is something liberals in Congress don’t want. But it’s a chance for the president to show leadership on an issue that will help ensure his party doesn’t return to minority status for the last two years of his term.

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