Budget Impasse Reflects GOP Schism

Tax Cutters in Standoff With Advocates of Fiscal Restraint

For Immediate Release:

June 30, 2004

Contact:Jonathan Weisman

The Washington Post

A deep rift in the Republican Party has left Congress unable to pass a budget this year, raising the probability that, for the third time in three decades, lawmakers will not agree on a detailed blueprint for government spending and tax policy.

The budget meltdown was triggered by a feud between conservative Republicans who favor continuing to cut taxes in the face of record budget deficits and GOP moderates who are pushing for curbs on tax cuts and are reluctant to slash spending. Even a face-saving effort in the House to impose federal spending curbs blew up just after midnight Friday when 72 Republicans joined a united Democratic Party to torpedo the leadership-backed bill.

The collapse of budget negotiations is more of a political embarrassment than a practical problem for GOP leaders, who only two years ago sharply criticized Democrats for failing to pass a budget when they controlled the Senate. But some Republicans fear that this year's impasse reflects an irreconcilable division within their party that will imperil the government's ability to set tax policy and address ever-widening deficits as the baby boomers begin to retire.

"For a majority of Republicans in Congress, tax cuts are now more important than budget constraints, and they've gotten themselves between a rock and a hard place because you can't have both," lamented former senator Warren B. Rudman (R-N.H.), a prominent advocate of fiscal restraint.

Both conservative and moderate Republicans say the fight is over the future of their party. Neither side has given an inch. So, two months after the House and Senate passed budget blueprints for the fiscal year that begins in October, Republican negotiators have hit a brick wall in trying to reconcile the two plans. Senate Budget Committee Chairman Don Nickles (R-Okla.), who will retire at the end of the year, refused to declare the budget dead. "I assured everybody I will give up trying to pass a budget six months from now, no matter what happens," he joked.

But moderate Senate Republicans, who hold the key to a compromise, say there have been no budget discussions for nearly a month, nor are any planned. Unable to wait for guidance on spending levels that a budget is supposed to provide, the appropriations committees have begun drafting their 13 annual spending bills.

"Right now, it's fair to say things have moved on," said G. William Hoagland, a senior budget aide to Senate Majority Leader Bill Frist (R-Tenn.).

The budget resolution is a nonbinding measure that is supposed to guide Congress in setting tax and spending policy for the upcoming fiscal year. Despite the failure to agree on a resolution, both the House and the Senate are following the guidelines of their respective budgets, which offer similar limits on spending.

Without a budget, the Senate will lack parliamentary language that would allow senators to extend three expiring tax cuts with a simple majority vote in the 100-member body. Instead, Senate leaders will have to gather at least 60 votes to ensure that taxes do not rise at the end of the year.

House Republican leaders had also hoped to use the budget to quietly raise the $7.4 trillion federal debt limit, which the government could hit before the end of the summer. Without a budget, that limit may have to be raised by a separate vote on the House floor, which is political castor oil for Republicans in an election year.

But the main impact of Republican failure on the budget is symbolic, fiscal experts said.

"It's a sad story and a real blow that goes all the way back to the 1974 [budget reforms]," said Rudolph G. Penner, a Republican and former Congressional Budget Office director. "Back then, Nixon effectively accused Congress of having no rational budget process, no one actually tabulating the numbers. Now we're back to that."

At issue is the future of tax cutting in the face of budget deficits that will swell well above $400 billion this year. Senate Democrats, joined by Republicans John McCain (Ariz.), Olympia J. Snowe (Maine), Susan Collins (Maine) and Lincoln D. Chafee (R.I.), secured an amendment to the Senate budget that would force any future tax cuts to be offset by equivalent spending cuts or tax increases. House Republicans, pushed hard by the White House, refused to go along, demanding instead that such rules apply only to spending increases for Medicare, Medicaid and other entitlements.

If it continues, the fight could eventually have significant practical implications. Since President Bush came to office, Congress has passed tax cuts worth $1.7 trillion over 10 years, but all will expire by 2011, many before then. If the Senate's "pay-as-you-go" -- or "paygo" -- budget rules are in place then, lawmakers will be faced with allowing tax levels to abruptly return to the higher levels of Bill Clinton's presidency or cutting federal spending by hundreds of billions of dollars a year to preserve the Bush tax cuts.

"The reason we're going to the mat is, with all these expiring tax cuts, if you have paygo in place, you're going to virtually guarantee these tax cuts will go back up," said Rep. Paul Ryan (R-Wis.).

Ryan and other House Republicans argued that the budget must be brought into balance by reining in the size of government. "The deficit is a symptom; spending is the disease," said Rep. Jeb Hensarling (R-Tex.). "And we have to do something about the disease."

There are limits to the effectiveness of spending cuts. Even if Congress had eliminated every penny of the $438 billion in domestic discretionary spending this year, every education and health program, every homeland security effort, national park, interstate highway and federal prison, the government would still find itself in the red.

"When it comes to budgetary matters, we can't operate on ideological whims," Snowe said. "Numbers tell the truth."

Moreover, when the House was offered the opportunity to cut spending, the vote last week was not even close. A bill drafted by Hensarling to give the annual budget the force of law, clamp down on "emergency" spending bills, and require a "supermajority" in the House and Senate to exceed strict spending caps was crushed at 11:30 Thursday night, 326 to 88. A less sweeping measure establishing two years of strict spending caps and requiring entitlement spending increases to be offset by entitlement cuts lost 268 to 146.

"Tonight can aptly be called 'Republican Budget Failure Redux,' " House Minority Whip Steny H. Hoyer (D-Md.) said after the votes. "Republicans have followed their total lack of leadership on the most basic legislative duty -- to adopt a budget for the nation -- with a total lack of leadership on real budget enforcement legislation."

House Budget Committee spokesman Sean Spicer accused the Republican moderates of grandstanding as budget hawks, even as they continue to vote for bigger government.

"They are hardly deficit hawks," Spicer said. "If you see their name in press, nine times out of 10, they are wanting more spending."