The House and Senate passed their budget plans for the upcoming fiscal year last week, though details will still have to be worked out in conference. Not surprisingly, given the Democrats' monopoly and President Barack Obama's popularity, his major policies were accepted; both resolutions call for expanding health care, increasing education funding and implementing a new cap-and-trade regime to limit greenhouse gas emissions. They would also make the bulk of the Bush tax cuts permanent, except for those that hit families making more than $250,000 a year. Also similar: hand-wringing about the growth in national debt, even as all three budgets pump up that debt by trillions over the next decade — and beyond.
There are differences among the three budgets. The Senate did not include reconciliation instructions, the process that makes legislation filibuster-proof. The House did, hoping to facilitate passage of health care reform, even in the face of warnings by senators from both parties, including Robert C. Byrd, D-W.Va., one of the original authors of the procedure, that such an effort to marginalize the minority would make health care reform more difficult. The Senate also indicated its preference for a larger estate tax exemption and lower rate than are in the Obama budget or the House version, as well as rejecting a reasonable plan supported by Obama to ask high-income seniors to pay more for Medicare prescription drugs.
Demonstrating that it has no real appetite for meaningful energy policy at this time, the Senate passed an amendment that would prohibit climate-change legislation that would affect prices — which, of course, is part of the purpose of such a policy to help encourage less energy dependence. Message to Obama: Cap-and-trade is not looking good. Another amendment that fell by the wayside was a proposal to set up an entitlements commission — an idea that looks increasingly necessary as policymakers continue to punt on the topic.
The president's original framework, even relying on some budgetary sleights of hand, added $9 trillion to the debt over 10 years. Rather than change policy to brighten the fiscal picture, the House and Senate chose to add more gimmicks and dishonesty. They jettisoned the $250 billion placeholder the administration responsibly included to provide the banking system with more capital, and they skimped (in the House version) and outright ignored (in the Senate's) the White House plan to better prepare for budget emergencies and natural disasters. They also assume that the president's Making Work Pay tax credit will expire after 2010 (House) or 2012 (Senate). One of the lessons not to be learned from the Bush era is the trick of putting magically disappearing tax cuts into the budget. In a similarly disingenuous act, the House and Senate assumed that, down the road, they would allow the alternative minimum tax to take a large bite out of middle-class taxpayers. The technical term for that is: fat chance. Finally, while the president gamely submitted a 10-year budget, Congress reverted to the well-worn trick of a five-year budget to mask the longer-term costs of its decisions.
Rarely has there been a moment in history where responsible budgeting has been more critical for laying out a rational plan for the government to navigate tricky economic, financial, and fiscal challenges while simultaneously reassuring global credit markets that the United States is a safe place to invest. Yet all of these budgets fall short.