March 24, 2009 / 7:29 PM / 10 years ago

Brawl over Obama budget brews in Congress

WASHINGTON (Reuters) - Barack Obama is preparing for one of the toughest fights of his young presidency as Congress begins work on a budget that may trim his spending plans but back his healthcare, energy and education proposals.

President Barack Obama delivers remarks on clean energy and new technology in the Eisenhower Executive Office Building in the White House complex in Washington March 23, 2009. REUTERS/Jason Reed

Obama will meet fellow Democrats in the Senate on Wednesday to try to shore up support for a budget that likely would increase the deficit more than initially estimated by the White House — it’s now expected to be $1.4 trillion for next year.

Senate Budget Committee Chairman Kent Conrad, a Democrat, outlined the budget he will try to pass in the Senate, telling reporters he will push for adjustments that reduce the cost of Obama’s proposals by $600 billion over five years.

Republicans and some conservative Democrats have balked at the Obama budget plan, which totals $3.55 trillion for the fiscal year starting October 1. The Democrats control Congress.

The budget deficit would be around $1.2 trillion next year with Conrad’s proposed changes, which are a mix of spending cuts and tax changes, Conrad said. The Congressional Budget Office sees a $1.4 trillion deficit under Obama’s plan.

Conrad said cutting Obama’s request to fund another possible bailout of financial firms was among the changes.

A $700 billion Wall Street bailout last year was enacted outside of the regular budget, using “emergency” funds. If Obama needs more money, a similar route could be taken.

The Senate Democrats’ plan would embrace major elements of Obama’s February 26 budget request: It follows the administration’s military spending request, while also supporting Obama’s desire to restructure healthcare and develop alternative energy.

But it omits details on the plans, which Conrad said would give congressional committees leeway to develop initiatives.

Long-term deficits under the Senate proposal, which still must be approved by Conrad’s committee and the Senate, would fall to $508 billion in 2014, instead of Obama’s $570 billion.

WARNING TO REPUBLICANS

On the tax side, Conrad said his plan would continue middle-class tax cuts worth $601 billion, but not make permanent Obama’s $400 tax break for most workers, which was included in this year’s economic stimulus package.

He added that he would provide $72 billion in estate tax reforms and $216 billion to keep middle-class taxpayers from getting sucked into the Alternative Minimum Tax that originally was intended only for the very wealthy.

Conrad said any additional AMT fix would have to be paid for after three years and some of the tax cuts introduced by the Bush administration would expire for the wealthy.

The Senate Democrats’ plan also would garner $133 billion by closing some tax loopholes and raising other revenue, Conrad said. His panel will begin reviewing his proposal on Wednesday and intends to wrap up the work on Thursday.

The House Budget Committee will begin a marathon session on Wednesday to write its version of the budget plan.

Republicans say Obama’s budget plan and those being developed by Democrats in Congress expand government and raise taxes on the rich and some small business at a time when the country is mired in a deep recession. Obama, for his part, is trying to keep fiscally-conservative Democrats on board.

There was some evidence he and Democratic leaders were making inroads in winning support from that faction of the party. “I think it’s going in the right direction in terms of a smaller percentage increase in overall spending,” said Senator Ben Nelson of Nebraska after a briefing on the Senate Democratic budget plan.

Senate Minority Leader Mitch McConnell, in an interview with Reuters, said most Republicans would not back the Democrats’ budget because it included tax increases and spending hikes that would fuel the government’s huge debt.

“There is little or no Republican support for this budget,” McConnell said.

But Democrats are arguing that by embracing Obama’s call for more investment in education, healthcare and energy, jobs will be created while shoring up domestic programs that they say were largely ignored for eight years under Bush.

“Now is not the time to sit back and criticize,” Senator Patty Murray said in a open warning to Republicans.

But criticize is exactly what Republicans promise to do over the next two weeks as the House of Representatives and Senate debate and try to pass a non-binding budget resolution that will set national priorities for the next five years.

The Obama budget “changes the course of our nation in a fundamental way,” said Senator Judd Gregg, the senior Republican on the Senate Budget Committee.

Gregg said he and his fellow Republicans will offer a series of amendments that, taken together, would result in much lower annual budget deficits and a smaller increase in a skyrocketing federal debt that is expensive to finance.

Editing by Paul Simao

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