Policy Update

Congress Approves Budget Resolution

4/28/2005

After difficult negotiations, the House and Senate narrowly passed a Budget Resolution with a target of $2.56 trillion for 2006.

The votes on April 28 were largely along party lines--214 to 211 in the House and 52 to 47 in the Senate--with a few Republicans in each chamber voting against the budget. Congress had been unable to pass a budget in two of the last three years.

The budget contains a reduction of $35 billion in entitlement spending, including $10 billion from Medicaid and its provision of health care programs, over the next five years. Although less than the $51 billion cut proposed in the President's budget, this will mark the first such entitlement cuts since the 1997 balanced budget agreement.

The budget allows for $106 billion in tax cuts, permits oil drilling in the Arctic National Wildlife Refuge, and instructs Congress to implement a three-year freeze on most domestic non-defense, non-homeland security discretionary spending programs.

Although the budget resolution is nonbinding, it serves as an important overarching blueprint for key Congressional committees on tax and spending legislation, particularly the Appropriations committees, which are charged annually with drafting spending bills for all federal discretionary programs.

Republicans argue that the budget will result in gradual reductions in the deficit over the next five years, while Democrats counter that those projections are largely illusory because the budget does not reflect the cost of the war in Iraq, shortfalls in Medicare, and other potential legislation such as Social Security reform.