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Senate budget bill cuts $36 billion; Alaska drilling a contentious issue

Friday, November 4, 2005

WASHINGTON -- The Senate on Thursday narrowly approved the first cuts since 1997 to benefit programs such as Medicare, Medicaid and farm subsidies, giving Republicans a modest victory against ever-rising government spending.

The bill, passed by a 52-47 vote, makes mild cuts to the health care programs for the elderly, poor and disabled, but leaves the food stamp program untouched.

The measure also permits exploratory oil drilling in an Alaskan wilderness area. Five Republicans in the GOP-controlled Senate who oppose the drilling voted against the bill.

The spending battle now heads to the House, where Republicans are divided over whether to cut more deeply across a broader range of social programs. Also, House GOP leaders may remove a provision that allows drilling in the Arctic National Wildlife Refuge.

The Senate bill is estimated to trim $36 billion, or 2 percent, from budget deficits forecast at $1.6 trillion over five years. The cuts total $6 billion for the plan's first year, with deficits predicted to exceed $300 billion.

Still, Republicans said the debate was an important moment for their party, which gained control of Congress 11 years ago with promises to balance the budget. The return of intractable deficits and surging spending has caused heartburn for many Republicans over their record on holding the line on spending and addressing budget deficits.

The long-planned budget measure would make the first cuts to mandatory programs since 1997. These programs account for 55 percent of the budget and include Medicare, Medicaid, farm subsidies and student loan subsidies.

"After years of allowing spending to grow unchecked, I am gratified to see the Senate take a step in the right direction toward serious fiscal discipline," said GOP Sen. Judd Gregg of New Hampshire, chairman of the Senate Budget Committee.

Despite strongly supporting the overall effort, the White House has threatened to veto the bill over an obscure proposal to kill subsidies for some regional health insurers that offered Medicare prescription drug coverage. The White House's stand threatens $5.4 billion in savings.

Democrats generally opposed the bill because it allows the oil drilling and increases the deficit when coupled with a $70 billion tax cut bill.

"Their budget ... actually would make the deficit worse," said Senate Minority Leader Harry Reid, D-Nev. "That's fiscally irresponsible at any time, but especially when we should be saving to prepare for the baby boomers' retirement."

Yet Republicans did pick up the support of two Democrats, Sen. Ben Nelson of Nebraska and Mary Landrieu of Louisiana, whose hurricane-devastated state won emergency aid under the bill.

Also Thursday, the House Budget Committee approved a $54 billion deficit-reduction bill on a party-line vote. But so many GOP lawmakers are unhappy with the bill that Republican leaders acknowledge it will have to be reworked before a final vote in the full House next week.

It appears increasingly likely that protests from moderates will force House GOP leaders to drop the oil drilling plan and revisit it in final compromise talks with the Senate.

The Senate Republicans who opposed the budget bill over the drilling issue were Norm Coleman of Minnesota, Susan Collins and Olympia Snowe of Maine; Lincoln Chafee of Rhode Island and Mike DeWine of Ohio.

The bill reflects the influence of moderates who provided swing votes in the full Senate and in Senate Finance Committee, which came up with proposals to curb the growth in Medicaid and Medicare.

As a result, the Senate's cuts largely protect beneficiaries of the programs, while turning to drug companies, pharmacies and insurance subsidies for much of the savings. The Agriculture Committee, meantime, dropped plans to cut food stamps.

Still, there is plenty of sugar to go along with the fiscal medicine. The bill contains about $35 billion in new spending to go along with the cuts:

* Doctors would get an $11 billion reprieve next year from a scheduled 4.3 percent cut in their Medicare payments.

* Dairy farmers won a $1 billion extension of milk income payments.

* College students would get more than $8 billion in new grants.

* More disabled children would retain Medicaid health coverage.

Senators also approved a $2.7 billion plan by Sens. Mike Enzi, R-Wyo., and Edward M. Kennedy, D-Mass., to lower student loan processing fees and provide aid to students and schools in hurricane zones.

It passed after the Senate rejected, 68-31, a bid by conservatives to make much of the aid available through school vouchers.

The bill includes $3 billion to subsidize television converter boxes for an upcoming changeover to digital broadcasts.

At the beginning of Thursday's debate, Senate Majority Leader Bill Frist, R-Tenn., withdrew a $4 billion plan to combat avian flu, fearing Democrats would try to add even more.

Other provisions of the Senate measure include:

--$10 billion in new revenues from auctioning analog television spectrum to wireless companies.

--More than doubling the premiums paid by corporations to the financially troubled Pension Benefit Guaranty Corp.


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