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U.S. Senate Democrats move ahead with budget plan

Published 03/26/2009, 03:29 PM
Updated 03/26/2009, 03:32 PM

* Senate Democrats head toward passing $3.41 trillion plan

* Republicans offer budget alternative with few details

* Senate budget panel rejects attempt to cut some spending

By Jeremy Pelofsky and Richard Cowan

WASHINGTON, March 26 (Reuters) - U.S. Senate Democrats on Thursday pressed forward with a budget proposal that largely mirrors President Barack Obama's plan while Republicans scrambled to devise an alternative embracing tax and spending cuts.

The Senate Budget Committee moved toward approving its $3.41 trillion 2010 budget plan, adopting a few amendments but rejecting one by Republicans that would have sliced billions of dollars by freezing certain government spending for two years.

Both Democratic and Republican lawmakers have tried to cut some spending and tax breaks from Obama's $3.55 trillion fiscal 2010 budget proposal to assuage concerns it would swell the deficit by $9.3 trillion over a decade. The Democrats control the House of Representatives and Senate.

Obama argues that big spending is required to help pull the country out of its recession and promote his plans to overhaul U.S. energy, healthcare and education infrastructure.

But critics in both parties say the spending plan goes too far, setting up a showdown that could impact everything from bond rates and the value of the dollar to the future of middle-class tax cuts.

Obama made his budget pitch to Senate Democrats on Tuesday and challenged Republicans to offer their own ideas.

House Minority Leader John Boehner offered a 17-page pamphlet he described as a Republican alternative to Obama's budget, saying it "will return fiscal sanity in Washington."

Boehner called it a "leaner" budget than the Democrats are offering, with lower taxes and lower government borrowing.

Indeed, it was lean: several of the 17 pages were either chapter titles that were mostly blank or attacks of Democratic positions.

The document lacked any projections on deficits that would result from the Republican plan, how much it would reduce the growth in government debt or specifically where savings would be accomplished. Nor did it forecast U.S. economic performance, which has a big impact on future deficits.

MORE DETAILS SOON

Republicans said those details would be provided next week, just as the House is poised to debate and vote on the Democratic-proposed budget. What proposals House Republicans did detail included a parallel income tax system with two brackets instead of six, 10 percent for income under $100,000 and 25 percent for earnings above that level.

The Senate Budget Committee approved some amendments, including one to create a commission to root out government programs that no longer were needed and another one to direct funds to reform government contracting.

But on a party-line vote the panel rejected efforts by Republicans to cut some spending from the proposal such as freezing non-defense discretionary spending for two years and allowing it to rise only 1 percent in the next three years.

While any budget Congress passes would be nonbinding, it would set the funding parameters for such Obama initiatives as alternative energy development, the overhaul of the healthcare system and controlling the size of budget deficits.

The proposals moving through the House and Senate, likely to come to votes in each chamber next week, leave to committees the difficult task of crafting those initiatives Obama is seeking, but without adding to deficits.

Senate Majority Leader Harry Reid acknowledged that some fellow Democrats have raised objections about Obama's budget, but said he expected to find consensus. A simple majority is needed to pass the budget, and Democrats control 58 of the 100 Senate seats.

"There may be a couple of (Democratic) senators who may not like what's going on, but it's a handful," Reid, flanked by fellow Democratic leaders, told a news conference.

The House Budget Committee late on Wednesday passed its own $3.45 trillion budget plan that included large new investments in education and in healthcare.

Both committees rejected Obama proposals to make permanent a new $400 tax cut for workers unless the White House finds a way to pay for it, and for $250 billion in case additional money is needed to bail out banks and other financial firms.

The Democrats plan to pass their budgets in the full House and Senate next week, with or without Republican support, and work out a final compromise sometime next month. (Editing by Will Dunham)

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