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Managing America: Budget

TheWeekInCongress.com

Week Ending March 30, 2007

The FY 2008 Republican Budget Resolution

In an unusual precedent the Democratic House Leadership allowed the Republican Minority to present and debate its own budget resolution while the Democrat measure is also being considered.

Details of the bill are illusive but the bill supporters acclaim that their resolution has many selling points.

TAXES

The resolution retains the 2001 and 2003 Bush tax breaks and does not increase marginal rates. The 10% tax bracket for low-income taxpayers continues, there is no reduction in the child tax credit nor is there any change in the marriage penalty or death tax relief. Capital and dividend tax rates remain unchanged.

The Democrat bill offers the same enhancements but does not commit to continuing the 2001 and 2003 tax breaks beyond their current expiration date in 2010. It is reported that Democrats may want to eliminate a tax break to raise money that will replace the burgeoning Alternative Minimum Tax calculated to raise taxes significantly on over 13 million Americans next year. Although taxes would be raised or reestablished on a taxable activity the proposal is that it is a more mercenary alternative to allowing the AMT to expand with inflation any further. Simplistically, the removal of the AMT would result in lost revenue and so a deficit increase. because the Democrat resolution prohibits deficit increases the AMT tax revenue would be gotten from another source, ostensibly from one of the Presidents favored tax cuts.

The Republican resolution matches the Democratic bill by extending the AMT for one more year along with State and local sales tax deduction and the R&D tax credit.

SOCIAL SECURITY

The resolution aims to balance the budget by 2012 without using money from the SS trust fund.

DEFENSE AND OTHER MATTERS

Defense spending would match the President's request of  $50 billion. The President's provision to raise premiums for TRICARE insurance covering veterans over 65 are not included.

$42.4 billion would be spent ($2.8 billion over the President's request) for veteran's healthcare and related activities and mandatory fees and co-pays are not included.

Medical research would be funded at $1.3 billion over the President's request for NIH.

Community Development Block Grants are increased above the President's request.

ENTITLEMENTS

Aims to save $279 billion over 5 years, reduces the average annual growth of overall entitlement spending downwards from 5.2% per year to 4.3%. The Republican version claims that the Democrat resolution delays the reduction measures for five years.

MEDICARE

Protections against catastrophic medical costs are to be increased, beneficiary contributions are to be simplified, flexibility for hospitals serving unusually high low-income patients is to be increased.

Cost sharing is to be readjusted for high-income beneficiaries. States are to take a larger role in targeting hospital funds. The rate of growth for Medicare is slated to be slowed to 3.4% per year compared with 5.6% now. The slow growth is calculated to save $142 billion over 5 years.

MEDICAID

Moderates spending growth to 5.3% per year compared with the current (2006) growth of 7.7%.

MEDICAL MALPRACTICE REFORM

This Republican issue returns after failing to pass in the 108th and 109th Congress's. The resolution would cap non-economic damages in medical malpractice lawsuits allegedly leading to a $2 billion in savings in Federal health entitlement programs.

INCOME SECURITY

The earned income tax credit is somehow incentivized and fraud and overpayments in the Supplemental Security Income program is addressed.

AGRICULTURE

Farm commodity and crop insurance programs are continued.

STUDENT LOANS

Limits above average subsidies only to graduate students. Achieves savings of $4.9 billion over 5 years.

OTHER REFORMS

recoups funds lost on inspection and escort of foreign vessels and reducing the size of the Strategic Petroleum Reserve.

The legislative line-item veto that would allow the President return bill to congress for further consideration, requiring congress to write and debate new bills on the 'vetoed' issues is proposed in this resolution although it was defeated in the 109th Congress.

Earmarks would be curtailed by a point of order unless a list of earmarks and limited tax and tariff benefits are in the bill.

Emergency set-asides that budgets $6.45 billion for domestic emergencies would be ordered. The Budget Chairman could release funds as needed.

Pay as you go provision modified would require direct spending increases be offset by spending reductions, not tax increases, and applies the rule to FY 2007 whereas the Democrat pay as you go starts in FY 2008.

Discretionary spending caps would be established to curtail growth of programs.

Advanced appropriations would be capped at $23.6 billion or $2 billion less than the Democrat proposal.

Budget enforcement controls governing war on terror spending are removed.

The rule created by former House leader Dick Gephardt that automatically provides for an increase in the allowable debt limit would be removed and a yearly debate on increasing the public debt would ensue.

The Congressional Budget Office would be required to provide cost estimates of conference reports and unreported measures.

New spending items in any bill that authorizes more than $50 million would require a roll call vote.

Amendment in the nature of a substitute offered by Mr. Ryan, Tim (R-WI).

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