Senate budget would halve deficit in three years

WASHINGTON -- The Senate Budget Committee began debating a Republican-written 2005 budget on Wednesday that claims to halve the record deficit in three years, even if Congress provides $30 billion for Iraq. The plan proposed deeper deficit reduction and lower defense and domestic spending than President Bush sought in his budget last month. The Senate's $2.36 trillion election-year proposal parted company with him in other ways, too.

It ignores Bush's proposals to eliminate dozens of programs, to cut spending on water projects popular with lawmakers, and permit mineral drilling in a major Alaskan wildlife preserve.

It also shows the effects of spending $30 billion to maintain U.S. forces in Iraq. Bush's budget omitted that expenditure, even as administration officials conceded they would ask for up to $50 billion after this November's presidential and congressional elections.

"We did think it was important to put a plug in for that number because it is a more realistic estimation" than leaving it out, said Senate Budget Committee Chairman Don Nickles, R-Okla.

Even so, Nickles conceded to reporters that by the time the full Senate votes on his budget -- probably next week -- lawmakers likely will boost Pentagon spending to the levels Bush proposed. Domestic spending may rise as well, Nickles said.

The potential spending increases underscore the support from pro-defense conservatives and moderate Republicans that he will need to move the measure through the narrowly divided chamber.

Democrats criticized Nickles for not doing enough to reduce the deficit, arguing that his budget's $144 billion in tax cuts over five years would enlarge the red ink. They also complained that by limiting its projections to the next five years, the GOP plan hid the dramatically worsening budget picture beyond when the baby boom generation starts to retire.

"We are plunging into deep debt and dangerous policies without even a nod to the fiscal peril that stands before us," said Sen. Robert Byrd, D-W.Va.

Reflecting the perils of an election year, the GOP plan shows little taste for taming the growth of benefit programs like Social Security, which consume two-thirds of the budget.

Nickles said overall savings from those programs would total $21 billion over five years -- a tiny fraction for programs that will spend more than $7 trillion during that period. He proposed culling what he calls waste, fraud and abuse from Medicaid and from the earned income tax credit for poor working families, and raising customs fees.

Congress' budget sets overall tax and spending targets. Its details are not binding when lawmakers later write bills governing revenues and expenditures. The president does not sign the congressional budget.

Nickles hopes to push his budget through his panel on Thursday. The GOP-run House Budget Committee plans to vote next week on its own, similar plan.

The nonpartisan Congressional Budget Office expects this year's deficit to hit $477 billion -- a record in dollar terms.

The Senate fiscal blueprint envisions shrinking the red ink to $338 billion next year and dropping it to $223 billion by 2007 -- less than half this year's expected figure. Those figures exclude the costs for Iraq.

Assuming Congress provides $30 billion for Iraq -- money that would take several years to actually spend -- next year's shortfall would be $353 billion. The 2007 deficit would be $227 billion, still less than half this year's figure.

Under both scenarios, the 2009 shortfall would be $202 billion, still a huge figure.

Nickles also proposed:

--$814 billion for defense and domestic programs, excluding benefits like Social Security. That is $9 billion less than Bush proposed, but $26 billion more than this year, excluding the $87 billion Congress provided for Iraq and Afghanistan.

--$414 billion for defense -- $7 billion below Bush's plan. Remaining domestic programs would grow by $6 billion to $400 billion, with most of the increase going to domestic security.

--Of the $144 billion in five-year tax cuts, $80.6 billion would be protected from procedural delays that require 60 votes to end. The budget assumes these would extend tax breaks for married couples, the children's tax credit and the recent expansion of the lowest 10 percent tax bracket, plus moving up the scheduled elimination of the estate tax one year to 2009.