This morning Alan Greenspan testified at a Congressional hearing on the Economics of Retirement. In his testimony before the Senate Special Committee on the Aging, Greenspan restated his support for the creation of private Social Security accounts. He is a proponent of these accounts partly because he believes diverting payroll taxes away from a fund that can be spent by Congress would allow lawmakers to see the true size of the budget deficit, and would pressure them to reduce it. He stated, "We need, in effect, to make the phantom 'lock boxes' around the trust fund real." Senator Clinton (D-NY) responded to these comments with criticism for Mr. Greenspan, whose 2001 testimony to Congress urging tax cuts to avoid a surplus, she said, "helped blow the lid off the lock box." The Bush tax cuts that Greenspan originally supported are currently largely responsible for our record-level budget deficit, and the fact that Congress must now cut spending on domestic programs in order to deal with this deficit. To read more about the hearing, click here.

The Senate Chairman’s Mark, which was passed by the Senate Budget Committee 12-10 (a party line vote), proposes spending $2.56 trillion in FY 2006 and $13.8 billion total over the next five years. Despite these levels, the Chairman’s Mark would cut spending for domestic discretionary programs by approximately $207 billion over five years, adjusted for inflation. In 2010 alone, the Center on Budget and Policy Priorities estimates, funding for domestic discretionary programs would be cut by 13 percent. Like the House Committee’s Mark, the Senate version claims that lowering this spending over five years will succeed in halving the deficit. The spending guidelines laid out in the Senate proposal claim to produce a $208 billion deficit in 2010. Unlike the House markup, the Senate proposal includes caps for discretionary spending for 2006, 2007, and 2008. These caps would lock in cuts for spending through 2008, and would prove to be extremely harmful for programs already on the chopping block. The Senate Mark falls in line with the President’s request and proposes allocating $439 billion for defense and $404.5 billion for non-defense programs. Overall, this amounts to a 2.1 percent increase in spending. The Mark also proposes cuts in mandatory spending of $38 billion over five years. The Senate Finance Committee must make cuts of $15 billion over a five year period, so large cuts to Medicaid are likely. Like the House budget blueprint, the Senate version will go to the floor sometime next week for 50 hours of debate, likely followed by final passage. Senate debate begins on Monday, at which point there will be a series of tough amendments offered by Senators on topics such as farm payments, budget enforcement rules and oil drilling in the Arctic National Wildlife Refuge. Senator Feingold (D-WI), will most likely offer an amendment to create Pay-go rules requiring offsets for new tax cuts or entitlement spending. Under the Senate Chairman’s Mark, roughly $70 billion in tax cuts for the next five years would not require offsets.

Opposition to the outcome of yesterdays House Budget Committee markup started small and is growing significantly among House Republicans. The opposition began with a small group of Republican Study Committee leaders, including Rep. Mike Pence (R-IN), Jeff Flake (R-AZ), and Jeb Hensarling (R-TX). The Republican Study Committee is a House caucus of over ninety conservatives. Their opposition, which according to this article in The Hill has spread to over forty Republican representatives, is based in the fact that the leadership’s plan is “unenforceable because it does nothing to curtail House leaders' power to waive budget rules for legislation that violates the budget.” The Republican leadership – and especially Budget Committee Chairman Nussle (R-IA) – are worried these “rebels” will vote with the Democrats against the budget when it is brought to the floor next Wednesday. The RSC leaders have the support of many members of the “Tuesday Group,” which is a caucus of about thirty centrist House members. The Tuesday Group is chaired by Reps. Mark Kirk (Ill.) and Charles Bass (N.H.). Their coalition with the RSC is significant because together the membership of the two groups total nearly 120 GOP lawmakers. Their opposition to the budget blueprint put forth by Nussle has significantly spread beyond a few conservative leaders and members of the Budget Committee in the past two days, and is showing that the leadership’s insistence on unwavering support for the Chairman’s Mark have had little effect. Senate Republicans have also apparently been expressing concern about the budget proposals ahead of them. Today’s New York Times, reports, “the budget was not enough to mollify some Senate Republican moderates, who expressed concern Wednesday about extending the tax cuts at a time when the deficit is at a record high and domestic programs from farm subsidies to veterans' benefits and education are facing steep cuts.” Last year recall that a few key Senators – Voinovich (R-OH), Collins, (R-ME), Chafee (R-RI), and McCain (R-AZ) – were extremely outspoken in their opposition to budget policies which they did not feel were fiscally responsible. With this year’s budget, Chafee has said, “I've been consistently opposed to tax cuts when at the same time we're not controlling our spending, and I don't think this year will be any different.” Another Senator wary of fiscal irresponsibility, Snowe (R-ME), has said, “Suffice it to say, I do have serious concerns with the fundamental priorities that are being constructed in the budget. It's exacting a high price from some of the programs that are critically important to the future." Senator Coleman (R-MN) is yet another Senator opposed to the budget proposal; however he is opposed more to specific cuts laid out in the budget instead of the costly tax cut proposals. Coleman has gathered signatures of 57 senators to fight for urban renewal grants, which Bush has proposed to cut. The battle over the budget in the Senate will prove to be very interesting. Republicans have 55 votes in the Senate, which is four more than they would need to pass the budget if everyone voted on party lines. Past budget battles have resulted in Congress being unable to adopt a budget blueprint in two of the last three years; another failure to do this would reflect badly on both the President -- who has been lately stressing the importance of fiscal responsibility -- and Congressional GOP leaders as well.

Today marks the beginning of budget committee markups. Click here for the House Budget Committee Overview of the FY 2006 Budget Resolution. The Senate mark should be available later today. It appears today that House Republicans are planning to include approximately $48 billion in tax cuts in their budget resolution, while the Senate is supposedly planning to include around $70 billion. While these numbers are significantly lower than Bush's request, they are still extremely costly endeavors in a time when we are facing high cyclical deficits and proposing to cut spending for social programs significantly. A good editorial in today's Washington Post compares the Congressional Budget Committees' action of lowering the amount spent on tax cuts to "the restraint of a dieter who is accustomed to scarfing down three pies a day and wants applause for cutting back to one." This analogy is right on track. Any tax cuts pursued in this budget reconciliation process in conjunction with spending reductions in mandatory programs are costly and contradictory actions that use the guise of deficit reduction to further shrink the role of government and actually result in larger budget deficits. Click here and here for more information on the tax cuts. Click here for an informative Center on Budget and Policy Priorities report on CBO's recent preliminary analysis of the President's budget policy priorities.