In budget wrangling, cost of doing nothing grows

Congress plunged into next year's federal budget with marathon mid-week markups that framed a debate likely to be settled only by a new Congress and a new president.

At stake are competing visions of how to restore fiscal stability and keep the economy from sliding into recession.

For Democrats, the key is letting most of the Bush tax cuts expire in 2010, as currently projected, and targeting spending to promote growth.

Republicans say that tax cuts create the conditions for economic growth, and that it's spending, especially soaring entitlement spending, that must be cut.

But neither side of the aisle has the numbers – or consensus within its party caucus – to shift budget priorities decisively this year. The result is likely to be to punt long-term reform of taxes, spending, and entitlements to a new Congress.

With a bare majority in the Senate – and two of their own still in the hunt for the presidency – Democrats see little prospect of moving anything more than a status quo budget, if that.

"Our budget resolution for fiscal 2009 is no grand solution, but it moves us in the right way," said House Budget Committee Chairman John Spratt (D) of South Carolina, in his opening statement.

As the budget committee in the House began its markup Wednesday morning, the national debt stood at $9,369,868,561,555.66. That's about $30,000 owed by every American man, woman, and child, Democrats note as they argue the case for ending the Bush tax cuts.

Republicans counter that the nation's unfunded liabilities in Medicare, Medicaid, and Social Security are much larger. With an unfunded liability of more than $50 trillion, according to the Government

Accountability Office, that works out to $450,000 owed by every American family, says Rep. Jeb Hensarling (R) of Texas, who chairs the Republican Study Committee.

The White House budget projects a surplus of $48 billion by fiscal year 2012 and a surplus of $29 billion by FY 2013. The House version of the budget moves to a surplus of $178 billion by 2012; the Senate version of the bill anticipates a $177 billion budget surplus by 2012.

But neither the House nor the Senate version projects extending the Bush tax cuts, set to expire in 2010. House Republicans plan to propose a substitute that keeps taxes low and includes cuts in entitlement spending.

"The most irresponsible thing to do is a status quo budget ... to go on as is," says Rep. Paul Ryan (R) of Wisconsin, the ranking Republican on the House Budget Committee.

Without an extension of the Bush tax cuts, Democrats are in effect proposing the largest tax increase in US history, Republicans say.

Democrats say that are not raising taxes, simply letting some of the tax cuts expire. Senate Democrats propose extending the Bush tax cuts that mainly benefit the middle class, such as marriage-penalty relief, the child tax credit, and the 10 percent income-tax bracket.

"When we set out to do this budget, our overriding objective was to balance it, because we are appalled at the mountain of debt being left our children – and at our stature in the world as the greatest debtor nation," Mr. Spratt said.

But at the same time, he added, the nation needs to balance its priorities, so Democrats in both the House and Senate are also proposing increases in spending for education and children's healthcare as well as investments to make the US more competitive in the global economy.

An area of rare agreement in the budget debate is war spending.

Both the House and Senate budget panels propose fully funding President Bush's request for defense spending, which projects that war costs in Iraq and Afghanistan will drop to $70 billion in 2009, then zero out.

With war costs running at $193 billion in 2008, that's an unrealistic estimate, but Democrats are in no mood to increase it. "That number [$70 billion] fits the policy of most Democrats more than it fits the policy of the president, said Senate Budget Chairman Kent Conrad (D) of North Dakota at a breakfast meeting with reporters on Wednesday.

"Can you imagine the message it sends for Democrats, who want to get out of Iraq, to propose spending more than the president?" he added. "I could not pass a budget like that."

In January, Budget Committee chairs Spratt and Conrad called on the White House to send Congress a realistic budget.

"From a political standpoint, the stars aren't aligned to be able to make any significant progress in the short term," says US Comptroller General David Walker. "It is, however, critically important that the next Congress and the next president make fiscal responsibility and intergenerational equity [among] their top priorities."

"The US has five to 10 years to demonstrate to foreign lenders that "we're going to get serious about our fiscal future," he adds. "If we do, we can turn things around and make sure that our future is better than our past. If we don't, we'll be facing much more serious economic challenges and hardship that most Americans have ever seen in their lives."

The federal government's total liabilities and unfunded commitments for future payments related to Social Security and Medicare have increased to $53 trillion, up from $20 trillion, when President Bush took office, Walker says.

Sen. Conrad and Sen. Judd Gregg (R) of New Hampshire, the ranking

Republican on the Budget Committee, last September proposed a bipartisan task force to tackle the nation's long-term fiscal challenges, including the surging debt and retirement of the baby boomers.

But lawmakers do not see the current political climate as supporting such a bipartisan effort.

"Even if Congress comes up with a budget this year, the chances of its actually being implemented are relatively small," says Stan Collender, a longtime federal budget analyst.