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Democrats Try to Outflank GOP on Tax Cuts

Feeling the heat from GOP criticism that the Senate Democrats’ budget would lead to increased taxes, Democratic leaders decided to try to head Republicans off at the pass Wednesday by offering their own proposal to extend some of President Bush’s middle-class cuts beyond 2011.

And they had to do so without Sen. Chris Dodd (Conn.), who became the first Democratic presidential hopeful to miss an important vote this year.

In the process, Democrats gobbled up the entire $132 billion budget surplus they projected would arise by 2012 and broke a Senate tradition by denying Republicans the ability to offer the first amendment to the budget resolution.

Democrats made no apologies, saying they did both as a way to prevent their adversaries from winning votes on amendments designed to put Democrats on record as opposed to tax cuts.

“Democrats didn’t create a surplus [in the budget resolution] in order for Republicans to divert it to special-interest tax cuts,” said one Democratic leadership aide.

Indeed, Republicans said they had planned to use the surplus to offset the costs of extending many of Bush’s tax cuts.

“They guessed our first amendment,” noted one Republican tax aide.

With both parties squared off on largely partisan lines over the budget, Majority Leader Harry Reid (D-Nev.) was taking no chances this week and summoned Senate members of the Democratic presidential field back to Washington for Wednesday’s votes.

Sens. Hillary Rodham Clinton (D-N.Y.), Barack Obama (D-Ill.) and Joseph Biden (D-Del.) all attended Wednesday’s votes. In fact, after speaking with Reid earlier this week, Biden canceled speeches in Carson City, Nev., to the AFL-CIO and a local Democratic organization so he could attend the vote, a spokeswoman said.

As for Dodd, although his office acknowledged he would be traveling Wednesday evening, it was unclear where he would be. However, one source said Dodd was traveling to New York for a private fundraiser.

Finance Chairman Max Baucus (D-Mont.) indicated that the Democratic maneuver might make it tougher for Republicans to attract Democratic support on their tax cut amendments because Republicans would either have to find offsets for such cuts or have an amendment that creates an unbalanced budget.

“They can offer anything they want, but the surplus will be all used up,” said Baucus, who offered the amendment along with other Democrats.

The Democratic proposal calls for any projected surplus to be used for extending tax cuts for children and child care, low-income taxpayers and married couples, among other things. The proposal would also help smooth passage of a health care bill for poor children by protecting $30 billion from Senate procedural roadblocks known as budget points of order.

The amendment was adopted, 97-1, with only Sen. Russ Feingold (D-Wis.) voting against. But Budget ranking member Judd Gregg (R-N.H.) said Republicans would propose that even more of the president’s tax cuts be extended, particularly ones that have economic impact and “create jobs,” like breaks on capital gains and dividend income.

And although the adoption of the Baucus amendment appeared to limit options for Republican amendments, GOP Senators cheerfully argued that the move actually gave credence to the argument they’ve been making that the Democratic budget assumes large tax increases starting in 2011, when Bush’s 2001 and 2003 tax cuts are set to expire.

“It shows that their argument that tax cuts are not at risk in this budget … is, as we’ve said, specious and inaccurate,” said Gregg. “They wouldn’t have to offer this amendment if that were the case.”

Even Budget Chairman Kent Conrad (D-N.D.) appeared to tacitly agree with the Republican’s premise that his five-year budget plan presumes that taxes would go up.

“This will reassure those who have benefited from middle-class tax cuts that those tax cuts will go forward,” Conrad said on the floor.

Gregg also grumbled about the decision to ignore the tradition of giving the minority the first stab at an amendment to the budget resolution. But he said he did not blame Conrad.

“Traditionally, you always give the minority the first amendment, at least we did when I was chairman,” said Gregg. “But it wasn’t Kent’s decision.”

For at least the past five years, under Republican control, Democrats were allowed to offer the first amendment during floor debate, GOP aides noted.

“Technically, it’s the right of the Majority Leader to have first crack at amendments,” the Democratic leadership aide retorted without disputing the budget tradition.

In the meantime, Democrats and Republicans faced off in the House as that chamber’s Budget Committee spent much of Wednesday marking up its version of the measure and was still considering the bill at press time.

House Budget Chairman John Spratt (D-S.C.) has touted the measure’s application of pay-as-you-go spending rules and projected budget surplus by 2012, as well as an increase of $5.4 billion over the Bush administration’s request for veterans’ health care and services.

Both Republican lawmakers and the White House attacked the House budget, labeling the proposal as the “largest tax increase in American history,” because the measure, like the Senate plan, includes the expiration of tax cuts established in 2001 and 2003.

“The Congress should adopt a balanced budget that prevents a massive tax increase — the largest in history — from putting at risk the economic gains that are helping American families,” Office of Management and Budget Director Rob Portman said in a statement Wednesday.

But Spratt defended the proposal, which closely tracks the Senate measure, noting that the tax laws and their sunset dates were authored under a then-Republican majority: “We didn’t cause those taxes to expire,” he said.

John Stanton and Jennifer Yachnin contributed to this report.

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