House Republican rules ease way for tax cuts

WASHINGTON (Reuters) - U.S. lawmakers in the House of Representatives will have an easier time cutting taxes and a harder time approving new spending programs under rules adopted by the Republican-led chamber on Wednesday.

The new rules, which passed 240 to 191, reflect the strong anti-tax sentiment and appetite for sharp spending cuts that helped Republicans win control of the House in the November congressional elections.

Democrats say they could worsen the country's fiscal picture by allowing lawmakers to cut taxes without finding ways to make up for the lost revenue.

The new rules replace the "pay as you go" rules that had been in place when Democrats controlled the House between 2007 and 2010, which required new tax cuts or permanent spending programs to be offset with corresponding tax hikes or spending cuts elsewhere in the budget.

The new Republican-backed rules, by contrast, specify that tax cuts would not need to be offset. Furthermore, tax hikes could not be used to cover the cost of new permanent spending programs.

"The idea behind this package is to focus on ways we can increase the opportunity to reduce spending rather than increase it," said Republican Representative David Dreier, who chairs the Rules Committee.

The package, known as "cutgo," directs lawmakers to ignore the budgetary impact of making permanent the income-tax cuts that Congress extended for two years in a compromise with President Barack Obama last month.

It also exempts the Republicans' planned repeal of President Barack Obama's signature healthcare overhaul, which the nonpartisan Congressional Budget Office estimates would save $143 billion over the next 10 years.

DEFICIT WORRIES

Democrats said the rules amount to a fiscally reckless blueprint that shows that Republicans are not serious about bringing down the budget deficit, which reached 8.9 percent of GDP last year.

"The concern about deficits has disappeared from everything but press releases," said Democratic Representative Louise Slaughter.

When they were in charge of the House, Democrats waived the "pay as you go" rules in order to pass a variety of tax measures, noted Steve Ellis with the watchdog group Taxpayers for Common Sense.

"Cutgo takes a weak budget-balancing tool and makes it weaker," Ellis said in an email.

The new rules also would prevent the House from ducking a politically difficult vote on increasing the nation's debt ceiling, which is never popular with lawmakers who are wary that it could be construed as approving the nation's worsening fiscal situation.

In the past, the House has allowed the debt ceiling to rise automatically when lawmakers approved a new budget to set government spending levels.

"Congress has to vote clear, up or down, to raise the debt limit," said Republican Representative Paul Ryan, the incoming chairman of the Budget Committee.

Republicans have suggested that they might pair the next debt-ceiling vote, which must happen before the government overruns its current $14.3 trillion limit this spring, with long-term spending cuts to show that they are committed to getting the nation's finances under control.

(Editing by Eric Walsh)