House, Senate Pass Budget Resolutions
The House and Senate each passed their budget resolutions on April 2, mostly along party lines, before breaking for a two-week spring recess. The resolutions delineate approximately $3.6 trillion in spending for Fiscal Year 2010 and track closely with the major proposals outlined by President Barack Obama, including estimates of historic budget deficits. Those deficits could become significantly worse due to the adoption of an amendment in the Senate that calls for further cuts to the estate tax, benefiting the richest families in the country.
The House approved its version of the budget resolution on a vote of 233-196, the largest total supporting a resolution in the last twelve years, according to The New York Times. The House resolution calls for $1.27 trillion in discretionary spending, slightly less than Obama's budget request, and projects $3.95 trillion in deficits through 2014 – $747 billion less than if current policies were extended, according to the Center on Budget and Policy Priorities and the Congressional Budget Office (CBO).
The House resolution also opens the door for using budget reconciliation to pass major health care and education reform later in 2009. Budget reconciliation is a fast-track procedure that limits the time for debate and amendment process for future legislation and also protects bills from filibuster in the Senate. The House budget resolution contains instructions for three committees to report legislation using reconciliation procedures.
On the other side of the Capitol, the Senate passed its resolution a few hours after the House by a 55-43 margin, with two Democrats – Sens. Evan Bayh (IN) and Ben Nelson (NE) – and all Republicans opposing the resolution. In total, the Senate plan would allocate $1.21 trillion in discretionary spending – about $60 billion less than the House – and excludes any language allowing for the use of reconciliation in 2009. It also projects $3.822 trillion in deficits through 2014, $878 billion less than if current policies were extended, according to the Center on Budget and Policy Priorities and the CBO.
The final vote on the resolution came after the Senate worked its way through hundreds of amendments, many of which were politically charged. One in particular, offered by Sens. Blanche Lincoln (D-AR) and Jon Kyl (R-AZ), would cut the estate tax for America's wealthiest heirs by increasing the size of estates that can be passed on tax-free to $10 million for a couple (and $5 million for an individual) and reducing the estate tax rate to 35 percent. The Lincoln/Kyl amendment was adopted in a close vote – 51-48. Shortly after, the Senate also passed an amendment from Sen. Richard Durbin (D-IL) that prohibits any estate tax cuts called for in the Lincoln/Kyl amendment unless an equally large tax cut is passed for Americans making under $100,000 per year. That amendment passed 56-43, with Lincoln voting for it.
Obama's budget and both the House and Senate budget resolutions already call for the extension of the 2009 estate tax levels, which allow estates valued less than $7 million for a couple (and $3.5 million for an individual) to pass tax–free, with any amount above that threshold being taxed at a maximum rate of 45 percent. The cost of this extension would not be offset in any of the budget proposals, and it is possible that the requirement to offset the additional and substantial costs of the Lincoln/Kyl amendment will be ignored. This amendment, therefore, could end up substantially increasing already historic deficit projections. The Center on Budget and Policy Priorities estimates the Lincoln/Kyl amendment could increase deficits by as much as $440 billion over the next ten years, compared with current law.
The Lincoln/Kyl estate tax amendment created more than a few seemingly contradictory statements from senators about the relative merits of deficit spending, tax cuts for the affluent, and helping those most in need during this economic downturn. Ironically, Sens. Bayh and Nelson, the two senators who opposed their own party's budget because they felt it was irresponsible, supported the Lincoln/Kyl amendment.
Because the House did not include language similar to the Lincoln/Kyl amendment in its resolution, and because Senate Majority Leader Harry Reid (D-NV) and Senate Budget Committee Chairman Kent Conrad (D-ND) did not support the amendment, it is unlikely to appear in the final conference report of the budget resolution. That final conference report will need to be negotiated between the House and Senate, a process likely to last at least the next few weeks.