With the proposed markup date for the budget resolution set for March 9, behind the scenes negotiation involving the budget committee chairmen and members of Congress was in full swing last week and through the weekend. Senate Budget Chairman Judd Gregg (R-NH) and House Budget Chairman Jim Nussle (R-IA) have spent the last few weeks soliciting input from members. While details are still vague, there are some initial indications of the shape and scope of the resolution. Reports from the Republican Conference meeting March 3 indicate the majority has significant energy and interest to enact most or all of President Bush’s proposed cuts to spending as well as extend his tax cuts. House Majority Leader Tom Delay (R-TX) told reporters, “Every chairman stood up and was very confident and excited about doing it.” However, there is less unity on the Senate side, as Gregg continues to resist efforts to include approximately $100 billion in tax cuts in reconciliation instructions. At a leadership dinner March 1, House and Senate Republican leaders agreed to include reconciliation instructions for tax cuts in both chambers’ budget resolutions, but Gregg has argued this unnecessarily complicates the process. He feels there is no need to do this since none of the tax cuts are set to expire this year. He would rather advance cuts to mandatory spending and save tax cut policies for the future. In his first year as chairman, Gregg is perhaps trying to avoid a situation that occurred last year when four Republican senators joined Democrats in holding out for PAYGO rules in the budget resolution — a condition which ultimately doomed the bill. Yet the GOP leadership is being insistent and most observers believe the Senate, like the House, will include instructions to protect a certain amount for tax cuts. If tax cuts are included in the budget resolution, the instructions would not specify which cuts would be protected, only the total amount. GOP aides have said $106 billion would be sufficient to extend the 15 percent top rate on capital gains and dividends for two additional years through 2010, and to extend a few business tax provisions, including the research and development tax credit and new health tax credits included in the president’s fiscal year 2006 request, through the five-year budget window. That number is consistent with a recently released estimate by the Congressional Budget Office, which predicts that extending the expiring tax provisions over the next five years will cost $100 billion (See Bush Budget to Increase Deficits $1.6 Trillion over 10 Years.) Most reports from Congress do not include the $30 billion needed to pay for a one-year extension of relief from the Alternative Minimum Tax (AMT), which expires at the end of this year. It is unlikely this tax cut would be included in reconciliation instructions, however, because there is more broad support for extending that provision. When included in reconciliation instructions, extension of the tax cuts would only need a simple majority vote to pass and could not be filibustered. Hence, the strategy is to include the more contentious parts of the tax cut package in the instructions and leave extension of the AMT relief as a stand alone issue. The most difficult challenge Gregg is likely to encounter will be getting the Senate to pass some of the expected mandatory cuts in reconciliation, especially cuts to agriculture subsidies and Medicaid. Having to tackle the issue of extending tax cuts will only make the process more complicated and difficult. One likely outcome is for the resolution to include two sets of reconciliation instructions: one for tax cuts and another for spending reduction. GOP leaders in both the House and the Senate are likely to adopt this approach because it may help diffuse public perception of the trade-offs being made in the budget — namely cutting programs for low-income Americans to pay for extending tax cuts for the wealthy. Continuing to pass bills that add to the deficit, such as extending tax cuts without revenue increases elsewhere to offset the loss, is a practice Alan Greenspan once again warned against in his testimony before the House Budget committee March 2. Greenspan told Congress it “cannot continually introduce legislation which tends to expand the budget deficit.” He further advocated for a return to the budget rules of the 1990s, supporting a full PAYGO rule that would require both spending increases and tax cuts to be offset elsewhere in the budget. The budget resolution is scheduled to be marked up in committee on March 9. Both House and Senate GOP leaders hope to have the resolution pass before the Easter recess, which starts March 21.