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Road Map: Spending Bill Debate Precedes a Real Brawl

President Barack Obama’s budget blueprint released last week gores so many oxen that some are calling it a full employment act for K Street.

[IMGCAP(1)]Hedge fund managers could see their income taxes double, ending the “carried interest— break that has many of them paying a top rate of just 15 percent. Couples making more than $250,000 would see rates snap back to the Clinton-era 39.6 percent and see the value of deductions for charitable giving and other items decline to boot. Home health providers, hospitals, insurance companies and more would see their payments cut under Medicare.

Wealthier people would have to pay higher premiums for Medicare drugs. Financial institutions would lose subsidies for providing student loans. Oil and gas companies will lose $30 billion in tax breaks. And industries large and small would soon have to buy the right to emit carbon dioxide as part of the climate change legislation.

“It takes on more vested interests than any other budget I’ve seen in this town in 30 years,— said Robert Greenstein, executive director of the left-leaning Center on Budget and Policy Priorities. “It’s hard to see how it can gore any more oxes. … It is really going to help the bottom line of a lot of the K Street lobbying firms.—

Of course, all of that pain sits alongside lots of goodies with their own sets of powerful interests — including a down payment for universal health care, tax cuts for most Americans, the prevention of a cut in doctors’ pay and historic increases in renewable energy, education and health research.

The budget battles will start with the annual Congressional budget resolution — a nonbinding document that usually doesn’t matter that much. Congress often chugs along just fine without one, and it would be hard for the average American to tell the difference between a year when Congress passes one and when it doesn’t.

But that may change this year, when the resolution could take on a larger significance as Democrats look to build momentum for the epic battles later this year on health care and climate change.

The biggest choice facing Democrats is whether to give the budget resolution real teeth — in the form of fast-track rules for health care, climate change or both. Those rules, known as reconciliation, allow bills to avoid filibusters and pass with a simple majority.

The attraction of the idea for Democrats, particularly the most liberal ones, is obvious — they could pass a sweeping health care or climate change bill or a mondo combo platter without having to appease any Republicans.

Senators including Environment and Public Works Chairman Barbara Boxer (D-Calif.) are actively looking at the idea, although they face resistance from Budget Chairman Kent Conrad (D-N.D.), who has instead raised the idea of having a second budget later this year if needed.

If a bipartisan compromise can’t be reached on health care or climate change by the fall, Democrats could then pass a revised budget with fast-track instructions.

A senior Democratic aide panned the two-budget idea, saying, “I’m not sure that is going to fly with the caucus.—

But Obama’s budget director, Peter Orszag, acknowledged on ABC’s “This Week With George Stephanopoulos— that reconciliation is a possibility down the line.

“It’s not where we go first, but we have to keep everything on the table,— he said. “We want to get these — these important things done this year.—

The calculus is tricky. When Obama called for a cap-and-trade system for carbon dioxide, a handful of Senate Republicans gave him a standing ovation along with Democrats, suggesting at least the possibility of a grand bipartisan bargain that could prove elusive if Democrats use reconciliation.

One energy industry spokesman who suggests waiting a year or two on climate change said that using reconciliation “is the nuclear option— and that Democratic leaders don’t appear willing to go there yet. “It would signal all bets are off on any kind of bipartisanship,— he said.

Even if Democrats choose to go for reconciliation, they can face internal disputes over what to prioritize — health care or climate change?

Climate change seems to be the heavier lift, with Republican leadership already blasting cap-and-trade as a tax increase by another name in the midst of a recession, which paradoxically could make reconciliation more necessary if Democrats really want to get it done. And doing both in one bill could make for some messy politics.

As opposed to the budget resolution, the Senate fight over the $410 billion omnibus spending bill will be a relatively minor partisan scuffle.

Majority Leader Harry Reid (D-Nev.) has made passage by Thursday a priority because the continuing resolution that has kept the government funding since last fall will expire Friday.

Of course, Reid needs to beat back any and all amendments, regardless of merit, in order to ensure that the measure will make it to Obama by the end of the week. Any changes would force the House to take it back up again or require a potentially time-consuming House-Senate conference.

Senate Republicans are split on whether to support the bill, which the Senate Appropriations Committee says is a $19 billion increase over last year.

While Minority Leader Mitch McConnell (R-Ky.) said “Americans are getting whiplash from all the spending we’re doing around here,— Appropriations ranking member Thad Cochran (R-Miss.) has decided to support the measure — albeit with reservations.

Led by McConnell and Sen. John McCain (Ariz.), many Republicans are seeking to pass another continuing resolution that would fund the government through the end of the fiscal year — Sept. 30 — but Democrats are expected to easily beat back that proposal.

That likely means it will be up to a committed cadre of anti-earmark Republicans to provide the drama on the Senate floor, and Sen. Tom Coburn (Okla.) already has a list of 35 earmarks, out of his estimate of 8,575 in the bill, to cut.

“I am not opposed to earmarks if they are authorized and if they go through committee and if it is a priority, but the average American will wonder how in the world that is a priority when we spend $7.7 billion … so we can help Senators get re-elected,— Coburn said on the floor Monday.

Still, Coburn pledged to work with Reid on the timing and number of amendments to avoid delaying passage.

Reid defended the earmarks in the bill Monday, saying, “We have done a good job of cutting significantly government-directed spending, which I’ve been on record some time ago saying we have a constitutional obligation to make sure we’re involved in how the country spends it’s money. We shouldn’t leave how money is spent down to those big offices here in Washington. They’re made up of people I don’t think know my state as well as I do.—

The Appropriations Democrats said earmarks represent less than 1 percent of the bill and have been cut by 50 percent from fiscal 2006.

Emily Pierce contributed to this report.

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