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Chambers Set to Move on Budget Resolution

House and Senate budget negotiators are on the verge of finalizing a plan and both chambers hope to begin debate on a $2.6 trillion budget resolution conference report later this afternoon and evening.

After a tense day Wednesday in which Senate moderates and House conservatives were at odds over cuts to mandatory spending programs, House Republican leaders, and subsequently House GOP conservatives, acquiesced to the demands of Sen. Gordon Smith (R-Ore.), who had threatened to scuttle the budget agreement in the Senate if his demands on Medicaid spending were not met.

Rep. Jeb Hensarling (R-Texas) said House conservatives could live with mandatory spending cuts that total about $35 billion, nearly $6 billion less than they had sought in the talks between Senate Budget Chairman Judd Gregg (R-N.H.) and House Budget Chairman Jim Nussle (R-Iowa).

“We think Chairman Nussle has done a great job with what he had to work with on the other side of the Capitol,” said Hensarling. “We’re enthusiastic about a budget that has the first [mandatory spending reductions] in a decade.”

Smith had balked at requiring the Senate Finance Committee to find $16 billion in savings or cuts from mandatory programs, fearing that all $16 billion would be cut from Medicaid. Smith had earlier worked out a deal with Senate GOP leaders to only require $10 billion in cuts from Medicaid, along with an agreement with the White House to appoint a commission that would recommend the best ways to cut fraud and abuse in Medicaid without impacting medical benefits for the poor. (Smith won a Senate vote last month to eliminate all recommendations to cut Medicaid funding.)

Senate GOP leaders contended that the extra $6 billion would come from other programs besides Medicaid, but Smith refused to sign on to the budget agreement until they agreed to a maximum $10 billion instruction for Finance. Smith’s decision freed him to vote for the conference report and ensured that Sen. Norm Coleman (R-Minn.) would follow suit. Without those two votes, Senate leaders could not pass the budget conference report.

Gregg praised Nussle and House leaders for understanding the limits of the Senate.

“The House’s reaction [to Smith’s demands] was a very reasoned reaction and a fair reaction,” Gregg said.

Smith’s deal also limited the House Energy and Commerce Committee’s required savings number to drop from $20 billion to $14.7 billion. However, under reconciliation, the amount required in savings or cuts is a minimum and can be exceeded by the authorizing committees. Going beyond the reconciliation number may be more difficult to pass, however.

In addition, the budget agreement would require the Senate Health, Education, Labor and Pensions Committee to cut $6.6 billion from the Pension Benefit Guarantee Corporation, the government’s insurance for private pensions.

The Senate Finance Committee and House Ways and Means Committee would also be authorized to reduce revenues, or cut taxes, by $106 billion over five years. However, only $70 billion of that would be protected from a Senate filibuster.

The budget deal also paves the way for the Senate Energy and Natural Resources Committee and House Resources Committee to pass a bill opening up Alaska?s Arctic National Wildlife Refuge to oil and gas drilling. Because the budget assumes $2.4 billion in revenue from leasing ANWR land, any such bill would be immune from filibuster in the Senate.

Agriculture programs only face $3 billion in cuts to mandatory programs, such as farm subsidies and food stamps, among others. But Nussle said he does not anticipate that farm subsidies will bear the brunt of the cuts.

No bill requiring cuts or savings in mandatory programs is expected to come to the floor until September at the earliest. As part of Smith’s agreement with the White House and Republican leaders, he secured a promise that any bill cutting Medicaid spending would not come before Congress until after the presidential commission issues its recommendations on Sept. 1.

The budget resolution also sets a discretionary spending cap of $843 billion, which would constitute an overall 1 percent cut in discretionary spending accounts.

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