Democrats said we could do better than Republican-led Congresses that ran up trillions in debt, and that last year not only failed to approve a budget but left Washington without completing nine of eleven appropriations bills.  Now, we’ve proven it.  As Majority Leader Reid said: “Last year, Democrats promised that if given a chance to govern, we would take our nation in a new direction.  This budget provides the latest evidence that we’re delivering.”

 

On May 17, 2007, the House and Senate approved the conference report on S. Con. Res. 21, the Budget Resolution for Fiscal Year 2008.

 

With the approval of the Budget Resolution, Democrats have passed a budget that restores fiscal discipline and puts the middle class first.  It begins to reverse six years of fiscal mismanagement and harmful cuts in key areas.  It leads to balance and an actual surplus, while cutting middle-class taxes and funding priorities like education, children’s health care, veterans, and our troops – all without raising taxes.

 

The Democratic Budget Resolution outlines the federal budget for next year, as well as budget levels for Fiscal Years 2009 through 2012.  Although it is not signed into law, the Budget Resolution establishes the overall levels available for discretionary appropriations and for direct spending under the jurisdiction of authorizing committees.  Under the Budget Resolution, this is accomplished in the same common-sense way that our middle-class families manage their own household budgets – by balancing their checkbooks and paying their bills so that they do not burden their children and grandchildren with future debt.  While no single budget resolution can solve all of our budget challenges, this plan will begin to put the nation back on a sound fiscal path.

 

Democrats Restore Fiscal Discipline Without Raising Taxes

 

The Democratic Budget Resolution balances the budget and creates a surplus.  Under the Budget Resolution, the federal budget will be balanced within five years and, by 2012, there will be a surplus of more than $40 billion, all without raising a penny of taxes.  In the 1990s, Democrats made tough decisions that turned large deficits into record budget surpluses.  When President Bush came to office, the Republicans threw fiscal discipline out the window.  Instead of record surpluses, they ran record budget deficits.  And last year they operated without any budget resolution at all.  This year, for the first time in many years, the Democratic Budget Resolution will put the nation back on a sound fiscal path and return the budget to balance. 

 

The Democratic Budget Resolution provides a fiscally-responsible plan for our country.  The Budget Resolution restores a strong pay-as-you-go rule in the Senate, which requires that any new mandatory spending or tax cuts be offset or get 60 votes.  This rule helped us to restore fiscal discipline in the 1990s, and its reinstatement represents a major step toward a return to fiscal responsibility.  The Budget Resolution also limits the use of reconciliation (fast-track procedures that limit public debate and Senators’ opportunities to offer amendments) to deficit reduction measures only.  Since 2001, the Republican-controlled Congresses abused reconciliation by using the procedure to pass measures that increased the deficit by more than $1.7 trillion.

 

The Democratic Budget Resolution addresses long-term fiscal problems.  Given the impending retirement of the baby boom generation and health care costs that are rising faster than inflation, the United States faces a significant long-term imbalance between revenues and spending.  Unfortunately, the nation’s budget outlook and capacity to meet the anticipated needs of our citizens deteriorated dramatically under Republican policies during the last six years.  

 

When President Bush took office in 2001, we enjoyed a record $5.6 trillion ten-year projected surplus.  That surplus has been squandered.  Gross debt has exploded – rising from $5.8 trillion in 2001 to an estimated $9 trillion by the end of this year.  This debt is accumulating at the worst possible time, just before the retirement of the baby boom generation.  Much of the debt incurred during the Bush Administration has been purchased by foreign investors, making us more vulnerable to economic and political pressure from abroad.  

 

The President’s budget proposed to continue the fiscal approach that has brought these large deficits and growing debt.  In contrast, the Budget Resolution will put the nation back on a sound fiscal path and recognizes that a comprehensive effort, focused on the long-term fiscal imbalance should be undertaken on a bipartisan basis.  The Budget Resolution also includes a number of measures to begin preparing for our nation’s long-term fiscal challenges, including:

 

·        Health IT:  The Budget Resolution includes a deficit-neutral Health IT reserve fund designed to promote the use of advanced information technology to improve the quality and efficiency of health care.  

·        Comparative Effectiveness:  The Budget Resolution includes a “comparative effectiveness” reserve fund to jumpstart an initiative to bring down spiraling health care costs, which is the largest factor driving up the cost of our health care entitlement programs.

·        Long-Term Deficit Point of Order:  The Budget Resolution also creates a Senate point of order against legislation that increases the deficit in excess of $5 billion over the long term (in the four decades beyond the next ten years).

·        Program Integrity Initiatives:  The Budget Resolution cracks down on wasteful and fraudulent spending in the Social Security, Medicare, and Unemployment Insurance programs.  The budget provides for discretionary cap adjustments for program integrity initiatives in these areas, including $200 million more than the President’s budget in 2008 to go after Medicare fraud – for a total of $383 million.

 

The Democratic Budget Resolution Prioritizes Tax Cuts that Put Middle-Class Families First

 

The Budget Resolution embodies Democrats’ commitment to serving not just the privileged few, but all Americans, especially the hard-working middle class of this country.  Over the past several years, as Republicans have controlled the White House and both houses of Congress, they have dramatically increased our national debt and increased burdens on the middleclass.  While repeatedly running record deficits, largely because of spending billions of dollars on tax breaks for special interests and multi-millionaires Bush Republicans have not only ignored the economic squeeze facing the middle class, but made matters worse.

 

The Democratic Budget Resolution prevents the spread of the AMT so that it does not impose higher taxes on middle-class families.  The budget ensures that the number of taxpayers subject to the alternative minimum tax (AMT) will not be allowed to increase in 2007, giving Congress and the Administration time to come up with a permanent solution.  The Democratic Budget Resolution will protect some 20 million middle-class taxpayers from being subject to the tax. 

 

The Democratic Budget Resolution extends tax cuts to minimize fiscal burdens on middle-income families and their children and grandchildren.  These tax cuts include the:

 

·        Permanent extension of the Marriage Penalty tax relief;

·        Permanent extension of the $1,000 refundable Child Tax Credit;

·        Permanent extension of the 10 percent income tax bracket;

·        Permanent extension of the adoption tax credit;

·        Permanent extension of dependent care tax credit;

·        Permanent allowance of U.S. soldiers’ combat pay for the earned income tax credit; and

·        Reform of the estate tax to protect small businesses and family farms.

 

Further, the Democratic Budget Resolution expressly allows for additional new tax relief and the extension of expiring provisions, but only if the cost of these measures is offset.  Failure to offset the cost of future tax cuts would severely damage our nation’s finances just at the time we are trying to grapple with the retirement of the baby boom generation.

 

There is No Tax Increase in the Democratic Budget Resolution

 

Under the Democratic Budget Resolution, revenues are projected to total $14.828 trillion over the next five years.  Revenues, therefore, are only 2.1 percent above the level the President proposed, as estimated by the Congressional Budget Office.  The modest additional revenue in the Budget Resolution is not achieved through tax increases, but by closing the tax gap, shutting down abusive tax shelters, and addressing offshore tax havens. 

 

Contrary to Republican rhetoric that this budget increases taxes, closing the tax gap is not about raising taxes on anyone.  It is about collecting taxes that are already due under current law.  According to the latest estimate by the Internal Revenue Service (IRS), the tax gap in 2001 was $345 billion (and this total does not even include the billions of tax dollars lost to illegal tax shelters and offshore tax havens).  In the years since 2001, it is likely that the tax gap has grown even larger.  To help close the tax gap, the Budget Resolution supports steps to increase reporting and withholding requirements.  The budget will also fully fund the President’s budget request for the IRS, including additional resources available through a discretionary cap adjustment that directs $406 million to IRS enforcement activities. 

 

The problem of tax cuts expiring in 2010 and the growing AMT problem, as well as general frustration with the tax code, highlight the need for an overhaul of tax policy.  By requiring that additional tax cuts are paid for, the budget sets up the right incentives for bipartisan tax simplification and reform.  Working together, we can broaden and simplify the tax base to help keep rates low and generate needed revenues over the long-term.

 

The Democratic Budget Resolution Funds America’s Priorities

 

The Democratic Budget Resolution represents a fundamental change in the values that guide federal policy.  The Budget Resolution rejects the misplaced priorities of the Bush Administration, which wants to hand out tax breaks worth $150,000 per year to those making more than a million dollars while making deep cuts in education and Social Security benefits.  By contrast, Democrats’ priorities are focused on the needs of the overwhelming majority of Americans.  The Budget Resolution will fund a strong national defense, provide health care for children, make college more affordable, and improve health care for our veterans.  All, again, without raising a single penny of new taxes.

 

The Democratic Budget Resolution provides for a strong national defense.  The Budget Resolution provides robust funding for national defense and ensures that the resources will be available to address the most critical threats facing our nation.  It includes funding to address deficiencies in training, equipment, force protection, logistics, and military medical care,  and includes increased flexibility to meet America’s commitments to wounded and disabled military personnel and veterans, as well as their survivors.  The Budget Resolution provides more homeland security funding than the President’s request in order to adequately fund cooperative threat reduction and nuclear nonproliferation programs.  And it provides funding for the 9/11 Commission recommendations, particularly with respect to border security measures.

 

The Democratic Budget Resolution enhances health care for America’s children.  The Budget Resolution rejects the inadequate funding level proposed by the President for children’s health care and instead allows additional funding to improve children’s health through the State Children’s Health Insurance Program (CHIP).  More than 11 percent (or 8.3 million) of American children do not have health insurance.  Programs like CHIP are working to reduce this percentage by insuring low-income children who do not qualify for Medicaid but whose families cannot afford private insurance.  The Budget Resolution includes a deficit-neutral reserve fund to provide up to $50 billion for CHIP over five years to expand coverage to uninsured children and ensure that states can maintain current caseloads and provides for deficit-neutral improvements to the program.

 

The Democratic Budget Resolution invests in education to improve our schools, help families afford college, and strengthen America’s economy in the future.  The Budget Resolution provides for the extension of the college tuition deduction and for deficit-neutral legislation that would enhance benefits for post-secondary students, including reductions in interest rates on student loans, significant increases in grant aid for students, or tax benefits.  The Budget Resolution rejects the President’s proposed cuts in education and training and adds significant new resources that could be used for Head Start, Individuals with Disabilities Education Act, No Child Left Behind Act, and Pell grants.  For 2008 alone, the budget provides an increase in discretionary funding for education and training of $9.5 billion (including $2 billion in additional 2009 advance appropriations) above the President’s request. 

 

The Democratic Budget Resolution improves health care for our veterans.  The Budget Resolution provides critical resources to ensure that our nation’s veterans get the high-quality health care they deserve.  The mistreatment of wounded soldiers at the Walter Reed Army Medical Center has highlighted the President’s lack of focus on the well-being of our nation’s veterans and military personnel.  The Budget Resolution provides $43.1 billion for discretionary veterans’ programs, including medical care, and is consistent with The Independent Budget, a plan developed by four leading veterans groups, and the recommendations of the American Legion.  This funding level is $3.6 billion more than the President’s proposal for 2008 and more than $30 billion above the President’s proposal over five years.  This represents the largest increase ever provided for veterans’ medical care.

 

The Democratic Budget Resolution increases funding for other national priorities.  The Budget Resolution rejects the President’s proposals to again cut other critical domestic priorities and provides badly needed resources in key areas that have been underfunded or neglected, including the following:

 

·        Energy:  Democrats are concerned that the United States currently depends on imports for 60 percent of our oil and that in 2006 imports of petroleum-related products accounted for $291 billion, or 38 percent, of our $765 billion trade deficit.  The Budget Resolution provides for deficit-neutral energy legislation – including energy tax incentives – that would: 1) reduce our nation’s dependence on foreign sources of energy; 2) expand production and use of clean alternative fuels and alternative fuel vehicles; 3) promote renewable energy development; 4) improve electricity transmission; 5) encourage responsible development of domestic oil and natural gas resources; or 6) reward conservation and efficiency.

 

·        Health care:  In addition to the Health IT and Comparative Effectiveness programs described above, and Small Business health care legislation described below, the Budget Resolution provides for deficit-neutral measures that would: 

 

·        Improve long-term care, enhance the safety and dignity of patients, encourage appropriate use of institutional and community-based care, promote quality care, and provide for the cost-effective use of public resources;

·        Provide parity between health insurance coverage of mental health benefits and benefits for medical and surgical services;

·        Improve the health care system by creating a framework for using Medicare data to evaluate health care safety, effectiveness, efficiency, quality, and resource utilization in federal programs and the private health care system, if it protects privacy and prevents disclosure of proprietary or trade secret information;

·        Improve the Medicare program for beneficiaries and protect access to care; and

·        Establish a demonstration project to provide medical assistance to low-income HIV-infected individuals and extend the Transitional Medical Assistance program.

 

·        Agriculture:  The Budget Resolution includes a deficit-neutral reserve fund that can be used to provide up to $20 billion in additional funds for the anticipated reauthorization of the Farm Bill to address a number of priorities, including:  1) maintaining a strong farm safety net for our nation’s agricultural producers; 2) delivering natural resource conservation measures on private lands; 3) investing in energy research; 4) strengthening our rural economies through rural development projects; and 5) enhancing food nutrition assistance to help fight hunger. 

 

·        Manufacturing:  The Budget Resolution provides for deficit-neutral legislation that would revitalize the U.S. manufacturing sector by:  1) increasing federal research and development; 2) expanding the scope and effectiveness of manufacturing programs across the federal government; 3) increasing support for development of alternative fuels and leap-ahead automotive and energy technologies; and 4) establishing tax incentives to encourage the continued production in the United States of advanced technologies and the infrastructure to support such technologies.

 

·        Competitiveness:  The Budget Resolution reflects the Sense of the Congress to provide sufficient funding so that the United States can continue to be the world leader in education, innovation, and economic growth.  The Budget Resolution provides substantial increased funding above the President’s requested level for scientific research and education, including programs that will educate new scientists, engineers, and mathematicians, place highly-qualified teachers in math and science K-12 classrooms, and support independent scientific research.

 

·        Small Business:  The Budget Resolution rejects the President’s proposal to cut assistance to America’s small businesses and restores funding for the Manufacturing Extension Program, which helps small businesses adopt advanced manufacturing technologies.  The Budget Resolution also provides robust resources for the Small Business Administration’s budget.  In addition, the Budget Resolution provides for deficit-neutral legislation that would make health insurance coverage more affordable and available to small businesses and their employees, through pooling arrangements that provide appropriate consumer protections.

 

·        Affordable Housing and Community Development:  The Budget Resolution rejects the President’s proposal to cut Community Development Block Grant funding by $736 million, or 20 percent.  CDBG provides eligible metropolitan areas with annual direct grants that can be used to revitalize neighborhoods, expand affordable housing and economic opportunities, and improve community facilities and services.  In addition, the Budget Resolution provides for a deficit-neutral affordable housing fund financed by the housing government-sponsored enterprises (such as Fannie Mae and Freddie Mac). 

 

·        Local Law Enforcement:  The Budget Resolution continues funding for overwhelmingly successful local law enforcement programs, rejecting the trend that President Bush and congressional Republicans have established drastic reductions in funding – cuts of more than 50 percent since 2001 for these initiatives.  The Budget Resolution restores cuts to:  1) the Community Oriented Policing Services (COPS) program, which helps state and local law enforcement agencies hire police officers, enhance crime fighting technology, support crime prevention initiatives, and combat methamphetamine use and distribution, and 2) the Edward Byrne Memorial Justice Assistance Grant Program (Byrne/JAG), which helps state and local governments address gangs, drugs, and school violence.  Between 1994 and 2001, these two programs were credited in part for a decrease in violent crime of over 26 percent and a decrease in the murder rate of 34 percent. 

 

·        Immigration:  The Budget Resolution provides for deficit-neutral legislation on immigration reform.  The budget also reflects a Sense of Congress that funding for the State Criminal Alien Assistance Program, which provides funding to states and localities for reimbursement of costs incurred as a result of housing undocumented criminal aliens, should be consistent with the goal of achieving the program’s fully authorized level.

 

·        Child Care:  The Budget Resolution provides up to $5 billion in deficit-neutral funding for the child care entitlement to states and for legislation that would provide assistance to states for offering or expanding pre-school to children of low-income families.