House approves $3 trillion budget

WASHINGTON (Reuters) - The Democratic-controlled Congress on Thursday adopted a $3 trillion U.S. budget for next year as the House of Representatives put the finishing touches on a measure to eliminate deficits by 2012 while spending more than President George W. Bush wanted for domestic programs.

By a partisan vote of 214-210, the House approved the nonbinding Democratic budget that sketches out spending priorities for the next five years -- through a new president's term.

The Senate approved an identical measure on Wednesday, embracing Bush's continuation of a military buildup that sets aside more than $500 billion for national defense next year.

It will be up to the new president -- most likely Republican John McCain or Democrat Barack Obama -- and the next Congress to tackle the huge problems this budget mostly ignores: long-term tax policy and controlling the growing costs of health and retirement benefits for the elderly.

Robert Bixby, executive director of the Concord Coalition, a nonpartisan group that advocates balanced budgets, applauded Congress for passing a budget, which has become a rarity during election years. But he called it "a holding action basically ... the general consensus is all the big fights are going to come later."

The Social Security retirement program and Medicare, the government-run health insurance program for the elderly, will explode in size in coming years, threatening huge, long-term budget deficits unless cost savings are found.

Over the next 25 years, the number of Americans aged 65 and over will grow to 20 percent of the population from about 12 percent now, as aging baby boomers strain the budget.

House Budget Committee Chairman John Spratt, a South Carolina Democrat, said the budget "charts a new course. It returns the budget to balance, reaching a budget surplus of $22 billion in the year 2012 and staying in surplus through 2013."

He added it also began "undoing the damages done by the president's budget" by adding money for child health care and rejecting cuts to domestic programs such as law enforcement, education and energy aid to low-income families.

Without Medicare and Social Security reforms, those future surpluses will likely evaporate.

'CRUSHING BURDEN'

Besides setting broad goals for federal spending and taxes, this budget also would raise the government's debt limit to $10.615 trillion from the current ceiling of $9.815 trillion.

Interest payments on the debt will cost taxpayers about $234 billion just this year.

Republicans, who voted against the budget, said the Democratic plan added significantly to the federal debt after years of Democrats chastising Republicans for doing so.

"We, with this budget, are going faster down the pathway of sending a crushing burden of debt and taxes on the next generation," said Rep. Paul Ryan of Wisconsin, the senior Republican on the budget panel. "Both parties have been responsible for not addressing these problems."

Earlier this year, the House and Senate passed slightly different budget blueprints for fiscal 2009 that starts October 1. This compromise measure sketches out about $21 billion more in non-defense domestic spending than Bush requested for next year.

It would result in a budget deficit of about $340 billion in fiscal 2009. That does not include the full costs of the wars in Iraq and Afghanistan.

Some economists speculate this year's budget deficit could be more than $400 billion, largely because of war costs and the fallout from a poorly performing economy.

The budget blueprint is not signed into law. It gives guidance for lawmakers as they weigh a series of spending bills later in the year.

(Editing by David Alexander and Peter Cooney)