Senate Approves Fiscal Year 2005 Budget Resolution: Caps Spending for Many Human Needs Programs but Rejects Proposed Cuts on Medicaid, EITC
In the early morning hours of Friday, March 12, the Senate approved a $2.4 trillion budget plan for next fiscal year by a vote of 51 to 45. The resolution provides virtually no new money for domestic discretionary programs – that is, non-defense, non-homeland security programs that must be appropriated each year. Many federal programs serving moderate and low-income families – such as job training, child care, housing, child welfare programs and Head Start – fall into this category of spending. The lack of new money means that spending for most services for needy families is held below the level of inflation.

Lawmakers made room in the resolution for more than $80 billion in tax cuts over the next five years. The tax provisions, which are included in reconciliation instructions to the Finance Committee, would extend three popular expiring tax cuts: marriage penalty relief, the increase in the child tax credit, and the expansion of the ten percent tax bracket.

Advocates for low-income families scored two key victories during the floor debate of the resolution. On Wednesday, the Senate approved two amendments that will protect low-income programs in the budget process. An amendment offered by Senator Baucus removed instructions in the budget resolution that directed the Finance Committee to cut $14 billion from Medicaid and the Earned Income Tax Credit.

Republican Senators Lincoln Chafee (RI), Susan Collins (ME), Olympia Snowe (ME), Norm Coleman (MN), Gordon Smith (OR), Arlen Specter (PA), Kit Bond (MO), and Mike DeWine (OH) joined all Democrats but Zell Miller (GA) in supporting the Baucus amendment by a vote of 53 to 43.

An amendment offered by Senator Feingold, agreed to by a 51 to 48 margin, fully reinstates pay-as-you-go (PAYGO) rules. The PAYGO rules require that any new spending or tax cuts must be paid for by tax increases or spending cuts — unless 60 Senators agree to override the requirement. Observers of the Senate expect legislation extending the three tax cuts will earn the 60 votes needed to override the PAYGO rule.

Four Republicans – Senators Lincoln Chafee (RI), John McCain (AZ), Susan Collins (ME), and Olympia Snowe (ME) joined all the Democrats except Zell Miller (GA) to approve the Feingold amendment. The Feingold amendment represented a clear rejection of a plan in the President’s budget to implement a distorted pay-as-you-go rule that would have required that new spending be paid for by cuts to programs but new tax cuts would not have to be paid for. The momentum behind the Feingold amendment was felt across the Capitol, where some House Budget committee members demanded that legislation reinstating PAYGO rules only for new spending move alongside a House budget resolution (see story below.)

The Senate rejected an amendment that would have created a $60 billion program to help reduce the number of uninsured, but did agree to an amendment offered by Arlen Specter (R-PA) and Tom Harkin (D-IA) to increase discretionary health spending by $2 billion.

Through their phone calls and visits, advocates were instrumental in persuading a majority of the Senate to support the Baucus and Feingold amendments. Advocates are encouraged to thank Senators who voted in favor of these important improvements.

Next Steps
The House Budget Committee began marking up its budget resolution on Thursday, March 11 and will try to complete it next week. Once the House approves a budget resolution, differences between the Senate and House resolutions must be resolved in a conference agreement that both chambers must approve.

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