Democrats set to move balanced budget plan

WASHINGTON (Reuters) - Democrats in Congress will try to pass a fiscal 2009 budget blueprint this month that, like President George W. Bush's proposal, claims to erase government budget deficits by 2012 but rejects many of the domestic spending cuts sought by the White House this year.

House and Senate budget panels begin drafting their proposals on Wednesday, for the fiscal year that begins October 1, with the goal of sending them to the full House of Representatives and Senate next week, where close votes are expected.

In touting a balanced budget amid huge deficit spending throughout Bush's two terms, both the White House and Democrats are not counting a huge expenditure -- the Iraq war -- beyond the unrealistically low $70 billion penciled in for next year and nothing for subsequent years.

Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat, gave reporters a preview of his $3 trillion plan, which would clear the way for various other committees to begin writing specific bills carrying out the budget's goals.

But with the White House already threatening to veto domestic spending bills that exceed Bush's request, Democrats are weighing whether to hold off passing many of them until early next year, when they hope a fellow Democrat will have been elected to replace Bush as president.

The Democratic budget proposal includes about $35 billion to invigorate the U.S. economy, to be used if a $152 billion stimulus package recently signed into law fails to do the job.

That additional money, coupled with more investments in energy, health care, education and public works projects than Bush sought, would "strengthen the economy and create jobs," Conrad said.

Senate Republicans, who are not expected to support the proposal, were criticizing it before being shown the details.

New Hampshire Sen. Judd Gregg, senior Republican on the Senate Budget Committee, called last year's Democratic budget a "classic tax and spend budget and this year's will probably be worse."

PLAY OUT ON CAPITOL HILL

The budget debate will play out on Capitol Hill as the presidential campaigns are in high gear.

Gregg, saying Democratic presidential candidates Barack Obama and Hillary Clinton are proposing "massive increases in spending" if they are elected, claimed they ultimately would have to finance their proposals with higher taxes on "ordinary Americans."

Zeroing in on the Illinois senator, Gregg called his fiscal plan the "Obama-spendo-rama."

But for all the arguing in store between Democrats and Republicans over a $3 trillion fiscal 2009 budget, Conrad said their differences were not that severe.

The proposal that likely will clear the Senate Budget Committee would provide, Conrad said, every penny of the $2.9 trillion defense budget for 2009-2013 that Bush requested.

For other domestic programs, the Senate Democratic plan would spend 1 percent more than Bush this year, Conrad said. Half of that money would go for the additional economic stimulus and the rest for a range of domestic programs, such as law enforcement and domestic security, at a cost of about $18 billion more than Bush wants.

Conrad said his bill also will provide another one-year fix to the "alternative minimum tax" so that middle-class taxpayers are not socked with a higher tax bill. The AMT originally was designed to stop the wealthiest from avoiding paying any taxes.

The ATM fix would cost the Treasury of $62 billion, and Conrad said there were not enough votes in the Senate to require an equal amount of spending reductions or tax increases. Moderate Democrats in the House have pushed for paying for the annual AMT fixes so they do not add to government debt that recently breached $9 trillion.

(Edited by Philip Barbara)