With a markup scheduled for tomorrow afternoon, Senate Budget Chairman Kent Conrad (D-N.D.) is putting the final touches on a blueprint that’s expected to map out a deficit-reduction strategy that claims to be in balance by 2012.

Abiding by tradition, the recently minted chairman is holding a two-day markup beginning tomorrow with opening statements at 2:00 p.m. A second day on Thursday morning will be used to consider amendments.

Although Conrad was holding his cards close to his chest at press time, he told The Washington Post yesterday that his budget accommodates an extension of President Bush’s 2001 and 2003 tax cuts — but only if they are fully offset.

House Budget Chairman John Spratt (D-S.C.) provided some insight into his policy priorities yesterday, telling the National Association for Business Economics that “everything has to be on the table” to balance the budget, including “defense spending as well as domestic spending, tax increases as well as spending cuts.” Spratt added that once a balanced budget is achieved, Congress and the president should then address Social Security, since it is “easier” to resolve than Medicare and Medicaid.

“Medicare is a much tougher nut too crack,” Spratt said, “because it is a subset of the medical delivery system in this country, and rising like the cost of all medical care.” Spratt could unveil his fiscal 2008 budget blueprint next week.

Both chambers’ budgets are expected to assume increased revenues from closing the so-called “tax gap” — the difference between taxes paid and taxes owed to the federal government. In light of the House’s renewed “pay-as-you-go” requirements, these additional tax gap receipts may be tied to offsetting, at least in part, another extension of alternative minimum tax relief, although that remained unclear at press time.

While Conrad, Spratt and President Bush have all voiced their intent to whip the deficit over the next several years, CRS has called this goal imperative over the long term because the national debt that accumulates under multi-year deficits cannot grow indefinitely.

In a report dated Feb. 15, CRS provided lawmakers with some “generic” options for balancing the budget in the next fiscal year. For example, assuming the White House’s projected deficit of $239 billion in fiscal 2008 is precise, then fully offsetting this shortfall would require a 15 percent reduction in mandatory programs or a 46 percent cut in non-defense discretionary programs, according to CRS.

On the revenue side of the federal ledger, CRS asserts that “eliminating only the two largest tax expenditures, the exclusion for health insurance premiums and deduction for home mortgage interest, would raise more than enough revenue under the Administration’s budget to balance the budget without any change in marginal rates.”

CBO has given the administration’s proposals a 50-50 chance of returning the budget to balance by 2012.

“Assuming that the President’s policies are enacted in their entirety and that no other legislation affecting spending or revenues is enacted in the next five years, the likelihood that the budget will be in deficit in 2012 is about equal to the likelihood that it will be in surplus,” according to CBO’s preliminary analysis of the White House’s fiscal 2008 budget request.