Budget Including Medicaid Cuts Passes

WASHINGTON – A $2.6 trillion budget outline barely approved by Congress will cut projected spending on Medicaid (search) for the poor, lock in tax cuts and — Republicans claim — put the country on a path toward lower federal deficits.

Democrats unanimously opposed the spending outline passed late Thursday. They said the budget reflects the president's misplaced priorities by freezing or trimming health, education and agriculture programs while cutting taxes by as much as $106 billion over five years.

The vote was 214-211 in the House and 52-47 in the Senate.

The budget resolution is nonbinding, but it sets critical guidelines for lawmakers as they make decisions on taxes and specific spending programs for the 2006 fiscal year that begins October 1. Equally important, tax and spending legislation passed under direction from the budget is immune from Senate filibusters (search).

That could make it easier to open the way for oil drilling in the Arctic National Wildlife Refuge (search) and facilitate GOP efforts to reduce spending increases in Medicaid and other entitlement programs. About $70 billion of the $106 billion in tax cuts would be protected by resolution, meaning it could be approved by a simple majority in the Senate rather than the 60 votes needed to break a filibuster.

President Bush, in a statement, said the budget plan "protects America, helps economic growth, funds our priorities and keeps us on track to cut the deficit in half by 2009."

Senate Budget Committee Chairman Judd Gregg (search), R-N.H., said it was a first step toward confronting the "massive problem" of meeting the nation's defense and domestic spending needs while coping with relentlessly rising baby boomer health and retirement costs. "The president sent us a budget which for the first time in seven years stepped on the sacred ground of trying to address the entitlement costs of the federal budget," he said.

It was the effort to control spending on the Medicaid health program for the poor — one of the three big entitlement programs, along with Medicare and Social Security — that created the biggest obstacle to agreement on the budget. Medicaid was last cut in 1997.

Democrats and some Republicans, led by Sen. Gordon Smith of Oregon, objected that cuts in projected spending for Medicaid would impose a hardship on states that rely heavily on federal grants to care for the poor.

The final agreement accepted by Smith would shave automatically increasing benefit programs by $35 billion over five years, with Medicaid singled out for a $10 billion reduction in the four-year period beginning in 2007. That would give a new commission and the nation's governors time to recommend cost savings.

The budget resolution also directs lawmakers to cull about $3 billion from agriculture programs and as much as $6.6 billion from federal pension programs, in part through higher fees paid by employers.

"It has been a difficult process," Smith said.

Gregg pointed out that the savings accounted for only about 1 percent of Medicaid's projected spending of more than 1.1 trillion over the next five years. "You would think we were scorching the earth when we originally proposed it," he said.

House Majority Leader Tom DeLay, R-Texas, said it's time to look closely at benefit programs that are "popular but rife with waste."

But Sen. Hillary Rodham Clinton, D-N.Y., said her state alone would lose $1.37 billion in Medicaid funding. "It is unconscionable to balance the budget on the backs of our most vulnerable Americans."

Republicans said the budget would put the government on a course of cutting the yearly deficit in half, from $521 billion in fiscal 2004 to $254 billion in fiscal 2008.

But Democrats argued that the national debt, the total amount owed by the federal government, would continue to rise. "I believe it is a profound mistake for this country to stack additional debt upon already record levels of debt that I believe puts the long-term economic security of our country at risk," said Sen. Kent Conrad of North Dakota, top Democrat on the Budget Committee.

The budget lays out plans and priorities for spending $2.6 trillion in fiscal 2006, projecting a federal deficit of $383 billion. The spending includes $1.6 trillion in entitlement programs, $439 million for defense and $404 million for non-defense programs. The $843 million in so-called discretionary spending was up 2 percent from the current fiscal year, in line with Bush's recommendations.

The agreement drops several billion dollars that the Senate voted to add to education spending and assumes $50 billion in extra spending next year for military operations in Iraq and Afghanistan.