During the week of May 7, House and Senate budget resolution conferees began meeting to settle differences between the House- and Senate-passed $2.9 trillion budget resolutions. Despite a pre-emptive veto threat by the Bush administration, conferees are expected to produce a more generous and more fiscally sound budget plan than the president has proposed. Since the beginning of March, the attention of much of Congress has been on the war in Iraq and whether or how to end it. But a small group of budgeteers, like House Budget Committee chair John Spratt (D-SC), his Senate counterpart Kent Conrad (D-ND), and other Democratic congressional leaders, have been quietly trying to work out compromises over the last few weeks that the budget resolution conference committee can ratify. The day after conferees first met last week, OMB Director Rob Portman sent a letter to Congress, threatening presidential vetoes of any appropriations bills that exceed the amount requested in President Bush's original FY 2008 budget. The timing of Portman's letter was intended to suggest sudden White House fiscal disciplinarianism. The budget resolution will set overall spending and revenue targets for fiscal 2008-2012, including the specific FY 2008 discretionary spending total — which is expected to be about $20 billion above the president's request. Given the president does not have authority to veto the congressional budget resolution, Portman took a shot at the spending bills that might result from the budget blueprint. The president does have authority to veto spending bills. The Portman letter was more about power struggles in Washington than it was about fiscal discipline. Conrad responded to Portman's letter in the Washington Post on May 12: "After racking up more than $3 trillion of new debt under its watch, the Bush administration now pretends to be fiscally disciplined by threatening to veto appropriations bills." As the House and Senate continue to negotiate over the total for discretionary spending, in addition to other issues, Conrad was arguing that the White House has sent an ironic message to Congress about fiscal discipline. Conrad, other Democrats and many fiscal conservatives have pointed out that the last six years have seen some of the worst fiscal management and debt accumulation in history — and many blame Bush for this situation. Now, as the Democrats wrestle with their first budget resolution during the Bush administration, the president says he is finally "serious" about fiscal discipline. Democrats in Congress are certainly serious about passing a final budget — something their GOP counterparts were significantly worse at achieving, having failed to enact one in three of the last five years. The budget resolution sets an outline for subsequent tax and spending bills and is an early test of the Democrats' ability to prove they can govern. It is also essential in re-establishing PAYGO rules in the Senate — a crucial step in enacting more fiscally responsible legislation in the future. While the conference committee is closing in on a final agreement, there are still a number of issues yet to be resolved:

• The Baucus Amendment: a provision in the Senate version of the resolution dedicating the $132 billion surplus projected for fiscal 2012 to pay for extending popular tax cuts over 2010-12, such as those benefiting married couples and the child tax credit, while fixing the estate tax at 2009 levels. The Senate indicated a preference to waive the offset requirements for certain tax breaks affecting the middle class and family farms, given that the Baucus amendment passed on a 97-1 vote, far in excess of the 60 votes required to waive the Senate's PAYGO rules. The House is less comfortable with that proposal, and it appears negotiators are trying to design a "trigger" mechanism in the House that would allows extensions of tax cuts expiring in 2010 under the Baucus Amendment to go forward only if surpluses actually materialize. This "trigger" would apply to legislation in the House but not the Senate. If the government does not produce surpluses in 2010, the tax cuts would have to be offset with spending cuts or other tax increases, as under the PAYGO rule.
• Reconciliation Instructions: The House version seeks special procedural protections from filibuster and amendment in the Senate, afforded by a "reconciliation instruction" to expand direct government aid to college students by cutting private lender subsidies. Conrad opposes instructions to the Education committees; he is on record saying that reconciliation is meant to be reserved for deficit reduction. He notes that Democrats criticized Republicans for misusing the reconciliation process and does not want Democrats to repeat those errors. Accordingly, Conrad does not like the precedent the House would set, since they only set aside a paltry $75 million in savings.
• Discretionary Spending Caps: The House and Senate are roughly $7 billion apart, with the Senate proposing a $948.8 cap on overall discretionary spending and the House proposing $955 billion. Rumors on Capitol Hill have pointed to a compromise figure tilting toward the House level. The numbers fly in the face of Portman's warning that he will recommend a veto of any spending bill that exceeds President Bush's discretionary FY 08 budget request of $933 billion.

The conferees have a lot to work out in a tightening timeframe if they intend to not extend much beyond today's (May 15) deadline for Congress to produce a budget resolution. The appropriations cap in the budget resolution is particularly important for the appropriations committees, which are permitted to report their spending bills to the floor of their respective chambers starting today. Without the guidance the budget resolution provides, the spending process becomes more of a free-for-all, first-come, first-served, with the faster-acting subcommittees leaving budget crumbs for the slower ones. Conrad and other budget leaders are still more focused on finishing the budget before appropriators are forced to move ahead on their own — likely by the end of this week — than on the premature threats issued by Portman.