Budget: Now it's Congress' turn

Key congressional committees are hashing out how Uncle Sam will spend money in 2010. It starts with Obama's $3.6 trillion outline.

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By Jeanne Sahadi, CNNMoney.com senior writer

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NEW YORK (CNNMoney.com) -- The fight on Capitol Hill over next year's federal budget begins in earnest on Wednesday, when the Senate and House Budget Committees will debate just how much they want to spend and tax in 2010.

Those meetings are the second formal step in a months-long process that started in February when President Obama put forth his own proposed budget outline -- a fuller version of which will be delivered to the Hill in April.

The president's proposed $3.6 trillion budget will frame the debate, as will the Congressional Budget Office's analysis of his budget proposals.

The CBO's estimates of how much the president's plan would increase the long-term deficit are notably higher than those of the administration and lawmakers must use the CBO numbers as their reference point.

Senate Budget Committee Chairman Kent Conrad, D-N.D., has warned that his proposed budget resolution would be less generous with the greenbacks.

"We've made hundreds of billions of dollars of changes [from Obama's budget request] to make this work, to get down to the deficit goal and at the same time maintain the president's priorities in education, energy and healthcare," Conrad told reporters on Tuesday.

Specifically, he said he made $608 billion of changes, according to Congress Daily.

One thing that Conrad cut out: the $250 billion the administration included in its budget as a "placeholder" for net costs of additional funds needed to stabilize the financial system.

His proposed resolution would also require that the budget find a way to pay for three years' worth of annual patches to protect upper-middle-income taxpayers from the Alternative Minimum Tax, Congress Daily reported.

Another difference: Conrad's budget resolution proposal -- known as the chairman's mark -- is for five years, instead of the 10 years that Obama has proposed. Generally speaking, it's harder to recognize the full cost of a measure such as health care reform or tax cuts if it's only mapped out over five years. President Bush put forth five-year budget proposals.

"We are very concerned about reports that the budget resolution will ignore the long-term implications of budget policies by limiting its scope to 5 years -- in contrast to the administration, which provided greater transparency on deficits by sending a 10-year budget to the Hill," said Charles Konigsberg, chief budget counsel at deficit watchdog group the Concord Coalition.

Conrad has said he's not recommending that any parts of the Senate budget resolution be protected under budget reconciliation rules -- a parliamentary procedure that would prevent any vote-delaying filibuster and allow a measure to pass with a simple majority vote rather than by the 60 votes normally required.

House Budget Chairman John Spratt, D-S.C., said he will also use a five-year time horizon and that a decision had yet to be made on whether to call for reconciliation on some measures, according to Congress Daily.

GOP's beef: Too much tax, too much spending

The Republicans' objections to the president's budget are far-ranging. In a nutshell, they say it taxes too much, spends too much and runs up the country's debts to unsustainable levels over time.

"This budget is firing real bullets this time. And, unfortunately, those bullets are going to put a lot of holes in the American economy, rather than improve it," Sen. Judd Gregg, R-N.H., the top Republican on the Senate Budget Committee, told reporters on Tuesday.

The Obama administration has promised to reduce the $1 trillion-plus deficit it inherited, which its proposals would do through 2012.

But over 10 years, the president's proposed budget would increase the cumulative deficit by $9.3 trillion relative to current law, according to CBO.

One of the biggest reasons the president's budget would raise the deficit is his proposal to make permanent President Bush's tax cuts for middle and low income families, as well as the new middle class tax credit and expanded tax credits Obama included in the economic stimulus package.

In addition, Obama not only included the $250 billion financial rescue placeholder, he also accounted for interest the government will owe on the money it will have to borrow because of reduced revenue and increased outlays.

Finally, the CBO's economic forecasts are somewhat less optimistic than the administration's -- and that has an effect on estimated revenue and spending.

Gregg said Republicans would propose amendments that would push the annual deficits to below 2% of GDP rather than the 4% to 5% a year the CBO estimates would exist under the president's budget proposal.

"We intend to propose amendments, which will limit the rate of growth of government on the discretionary side, on the entitlement side. We'll bring the debt back to a responsible level," Gregg said.

After the House and Senate budget committees pass budget resolutions, they will be sent next week to the full membership of each chamber for debate, amendments and votes. Then the appropriations committees will take over and start deciding how to allocate the money.

With any luck, lawmakers will arrive at a final budget for the president to consider before the fiscal year begins on Oct. 1. But it's been a few years since they have met that deadline. Case in point: They only recently finished working on the budget for this fiscal year.

In the meantime, cue the lobbyists. To top of page

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