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Budget Battle Far From Over

The ever-widening ideological rift between Senate GOP centrists and House Republican conservatives remains the biggest threat to a House-Senate compromise budget when Congress returns from its two-week recess April 4.

Both factions in their respective chambers have demonstrated that they control the swing votes and can fundamentally alter their leaderships’ budget plans. But each group’s priorities are so different that it’s no wonder House Budget Chairman Jim Nussle (R-Iowa) predicted a possible stalemate and House leaders are hoping for White House intervention.

“This may have been arguably the easiest hurdle,” Nussle said after House passage of a budget resolution Thursday afternoon, adding that he was waiting to see what the Senate was “able to limp off the floor with.”

Indeed, Senate Budget Chairman Judd Gregg (R-N.H.) hinted at the conflicts to come in a statement after the Senate passed a budget blueprint radically altered by the votes of a handful of GOP moderates.

“It will be impossible to develop a product everyone in both chambers will find perfect, but I am optimistic Chairman Nussle and I can produce a final product a majority will find acceptable,” Gregg said.

By banding with Democrats on several key votes, a handful of Senate GOP centrists put their mark on the Senate’s final budget plan, opting to increase discretionary spending by $5.4 billion for educational expenses and to prevent Congress from cutting roughly $14 billion in Medicaid funds.

Meanwhile, House GOP conservatives, under the rubric of the Republican Study Committee, took nearly the opposite stand when they arguably came close to preventing their chamber from adopting a budget in order to win the ability to cut both entitlement and discretionary spending.

Whether to force cuts in Medicaid largely serves as the “microcosm” of the two GOP factions’ differences, noted one Senate aide to a moderate Republican.

“Medicaid is likely going to be the litmus test when the budget goes to conference on whether House conservatives will succeed,” the aide said.

The House has proposed as much as $20 billion in Medicaid cuts, while the Senate’s original plan to cut $14 billion was eliminated by amendment on the Senate floor.

Sen. Trent Lott (R-Miss.), who supported cutting Medicaid spending, said there is virtually no way that a House-Senate conference committee would agree to exempt Medicaid from the billions of dollars in cuts to entitlement programs that the president has suggested.

“That won’t be what comes out of conference,” said Lott, who indicated Senate GOP leaders would find a way to make the moderates happy in other ways.

What remains unclear is whether enough Senate GOP centrists are willing to prevent a bicameral budget from taking effect if Medicaid cuts are included in any final budget package. The willingness of Senate centrists to reprise their role from last year as budget blockers remains tenuous. After all, only four centrists were needed last year to prevent the adoption of a bicameral budget. Six such rogue Republicans would be needed to do the same this year.

Already, Sen. Gordon Smith (R-Ore.), who sponsored the proposal to roll back the Senate’s proposed Medicaid cuts, said he will not vote against a final budget plan if the House and Senate look to restore some Medicaid cuts. Smith explained that having a budget that cuts Medicaid is better than having no budget blueprint at all.

“I’m on the horns of a dilemma, but I’m going to for vote for a budget,” Smith said. “I expect whatever they do will look different from what the Senate just struck down.”

Of course, 51 other Senators, including five other Republicans, voted with Smith on the Medicaid amendment. If all stand firm with Democrats, they would have enough to block the Senate from passing a budget.

But Smith indicated that he could change his mind if Senate leaders agreed to add back the entire $14 billion in cuts during conference.

The Medicaid issue goes to the heart of the differences the two chambers have on entitlement spending in general. The House has ordered a variety of committees to cut entitlement spending by $69 billion, while the Senate-passed budget calls for only a $17 billion reduction in entitlements. Originally, it called for $32 billion in cuts, still substantially less than the House figure. The gap will have to be filled somehow if either chamber hopes to fulfill Bush’s goal of halving the deficit in five years.

“I think we should yield to the House on as many issues as possible, as long as we can still get the votes” for final passage, said Lott, one of a core group of conservatives who were repeatedly rolled on budget votes last week.

Though Nussle admitted that he was “not real pleased with what the Senate had to say,” House leaders expressed hope that the balance could be tipped in the House’s favor during conference if the administration teamed with the House to extract concessions from the Senate.

“We’re hoping the White House will be engaged in conference,” said House Majority Whip Roy Blunt (R-Mo.).

Votes on final passage of the budget were close in each chamber, with four GOP centrists voting with all Democrats against the budget in the Senate and 12 Republicans balking at the House plan. Still, at 218-214, the final House budget tally appeared more of a squeaker than it actually was. Once House leaders beat back attempts by the RSC to secure broad budget points of order on bills, the comfort level on the final vote allowed the Whip organization to release a handful of moderate lawmakers from their private commitments so they could vote against the measure.

But it was the agreement with their conservatives that saved the day. Under the final deal with the RSC, any lawmaker can raise a point of order against an appropriations bill that exceeds the allocation provided in the budget resolution. The point of order would take place at the end of the amendment process and would only be allowed on House versions of spending bills rather than conference reports.

RSC Chairman Mike Pence (Ind.) called the rule change a “modest but meaningful” reform that carried significant symbolic value, even as House leadership supporters painted the deal as almost meaningless since House versions of spending bills almost never bust budget caps.

Still, Pence said he was gratified “to see the way our Members were willing to stand up for seven days to advance a change in House rules.”

Pence said his aims were simple.

“I think leadership knew going in that my only ambition was to make my yes mean yes and my no mean no,” Pence said.

But House GOP leaders doubtless know that if they give in too much to Senate GOP moderates, they could see another conservative revolt on their hands. Cuts in entitlements, like Medicaid, remain a central goal of House conservatives, who see entitlement spending as out of control and the cause of higher taxes.

Surprisingly, Democrats gave Republicans the winning margin on one of the few issues on which it appears the House and Senate will have little trouble reconciling. Five Democrats joined 50 Republicans in voting to nearly double the amount of tax cuts called for in the Senate budget blueprint, while five GOP centrists voted with Democrats against the proposal.

Rather than having just enough set aside to extend tax breaks on capital gains and dividend income, the Senate added $64 billion to cut taxes on Social Security benefits. That brings the total tax breaks the Senate has called for to $129 billion, all of which would be protected from filibuster. The House has called for only $106 billion, with just $45 billion protected from filibuster.

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