Conrad's Budget Plan - Too Good to be True?March 15, 2007 - by Donny Shaw
Democratic budget makers are trying to do it all in this years budget — increase spending, eliminate the deficit, and extend tax cuts.
Kent Conrad (D-ND) (pictured at right), Chairman of the Senate Budget Committee, will bring his draft of the fiscal year 2008 budget resolution to a mark up vote in his committee today. According to The Center on Budget and Policy Priorities (CBPP), this draft will serve in the budgeting process as “a vehicle that allows the Congress to set and enforce overall targets for federal spending and revenues, to indicate Congressional budget priorities in broad terms, and to serve as a blueprint for the consideration of subsequent legislation that fills in the details of the budget.”
The do-it-all plan laid out in Conrad’s draft, which ranking member of the Budget Committee, Judd Gregg (R-NH), describes as “Wizard of Oz tax policy,” does seem outrageous considering that Congress just voted to enact stricter rules to enforce fiscal responsibility. The rules, known as pay-as-you-go budgeting, require that any increase in entitlement spending be offset by an equal increase in revenue gained elsewhere.
Entitlement spending would certainly be increased in the proposal and it is coupled with a plan to make up for it. It establishes reserve funds for the spending increases and tax cuts. As the NY Times, explains, the reserve funds are “not funds in any normal sense. Rather, they represent a statement of intentions by lawmakers to raise the necessary money, through either spending cuts or tax increases, by the time it would be necessary to spend it.” The author of the Times article thinks that the reserve funds are so open-ended that they should not be considered a plan. He title the article: “Senate Democrats Have Spending Plan, but No Reserve Plan.”
However, the CBPP does not see these reserve funds as a bad thing. They claim that they have helped pay-as-you-go budgeting work in the past:
>When the Pay-As-You-Go requirement helped turn deficits into surpluses in the 1990s, budget resolutions regularly included so-called “deficit neutral reserve funds,” which indicated a commitment to enactment of certain high-priority program expansions or tax cuts, but allowed legislation to achieve those goals to go forward only if the costs of the legislation were offset.
Conrad, to subscription-only Congress Daily, gives these numbers of how his budget plan would fare in relation to inflation:
>Overall spending on both discretionary and mandatory programs would grow to $3.25 trillion in FY12, but total spending as a percentage of the economy would decline from 20.5 percent to 18.8 percent over five years.
The AP explains that Republicans are taking up issue with Conrad’s plan for giving President Bush’s tax cuts the benefit of the doubt by letting them expire as planned in 2010.
>Conrad’s $2.9 trillion budget plan came under immediate attack from Republicans for assuming Bush’s tax cuts expire in 2010 as under current law – unless lawmakers come up with more than $400 billion in additional revenues.
>And it assumes lawmakers will pass big revenue increases to finance changes to the alternative minimum tax that promise to be almost equally as expensive. Renewing other expiring tax breaks would require even greater tax increases.
>"This budget puts a burden on the (tax-writing) Finance Committee to come up with $916 billion," Sen. Charles Grassley, R-Iowa., said Thursday.
>The pending expiration of Bush’s cuts to income tax rates, penalties on married couples, inheritances and investments is a product of an obscure Senate rule governing debate on Bush’s 2001 and 2003 tax cuts.
>Bush frequently calls for his tax cuts to be made permanent, but Republicans have never seriously tried to renew them and Conrad assumes those decisions will be left to the next Congress and whoever is elected to succeed Bush.
OMB Watch lays out what they see as the good and bad parts of Conrad’s budget plan. For example, they make this interesting observation:
>Conrad conveniently assumes the exact same five-year levels of Iraq war spending as Bush does, which is ironic, since Conrad criticized Bush for “fail[ing] to include full out-year war costs”