Democrats put their stamp on US budget

Before leaving town last week, the House and Senate passed plans to spend nearly $3 trillion in the next fiscal year.

That news was nearly lost in a week that included dramatic testimony on the firing of eight federal prosecutors and war- funding bills that aim to force an end to the US combat role in Iraq.

While not as compelling a narrative, these budget resolutions give a first look at how the new Democratic majority on Capitol Hill plans to rework the fiscal priorities – and legacy – of the Bush White House.

House Speaker Nancy Pelosi says the budget, which cleared the House with a 216-210 vote on Thursday, is fiscally responsible and "takes America in a new direction."

At the heart of the new budget documents is commitment by both the House and Senate to get back to pay-as-you-go rules, which require lawmakers to find offsets for new spending or new tax cuts.

GOP says: It's the largest tax hike

That means that, for now, Congress is not proposing extending key Bush tax cuts set to expire on Dec. 31, 2010. If current law plays out, that means that income tax rates increase in all tax brackets, as well as for capital gains and dividends; the child tax credit drops from $1,000 to $500; and the estate tax, set to phase out in 2010, returns in 2011. Republicans are calling it the largest tax hike in US history: more than $700 billion over the next five years.

"Democrats had the chance to pass a budget that restrains spending, prevents tax increases, and addresses entitlement reform; instead, they chose to hike discretionary spending by almost $150 billion and pass the looming entitlement crisis to another Congress," said Senate Republican Conference Chairman Jon Kyl (R) of Arizona.

Democrats say that they are simply following current law – not repealing tax cuts, as many members of their caucus had proposed. "The '01 and '03 tax cuts remain in place for '07, '08 '09, and '10. When we get to December 31, 2010, we have a big decision to make. But we can approach that bridge when we come to it," says Rep. John Spratt (D) of South Carolina, who chairs the House Budget Committee.

Education, veterans priorities

On the spending side, both the House and Senate budget plans breach Mr. Bush's proposed $929.8 billion discretionary spending cap for the fiscal year beginning Oct. 1. Democrats propose more spending on education, veterans' healthcare, and other domestic priorities, such as home-heating assistance and support for an expansion of the Children's Health Insurance Program (CHIP).

While the president's budget adds $1 billion to Title 1, the federal program to help low-income students, it also cuts nearly that much out of other education programs. House Democrats propose $8 billion in new funding for education and $5.4 billion over the level of current services for veterans' healthcare.

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