Budgets Are Moral Documents:
A Campaign for Compassionate Priorities
The Federal Budget: Overview and Background
Earlier this year, Congress passed a budget resolution requiring congressional committees to develop legislation cutting various entitlement, or domestic social programs. The bills the committees are developing will be merged into a single bill. This new bill, called a reconciliation bill, is considered in the Senate under fast track rules making it difficult to amend and be filibustered. $35 billion in cuts were slated for entitlement programs, including cuts to both the Medicaid and Food Stamps programs.
The budget resolution also calls for a second reconciliation tax bill--meaning Congress will consider $70 billion in new tax cuts, without any provisions to offset the cost, under the same fast track legislative process. Together, the two planned reconciliation bills--one cutting programs, the other cutting taxes--would increase the deficit by more than $35 billion over five years.
The reconciliation bills were originally scheduled to be considered in September. However, in response to Hurricane Katrina, House and Senate Republican leaders delayed both the budget-cutting reconciliation bill and the tax-cutting reconciliation bill. It is now expected that sometime during the week of Oct. 24, House and Senate committees will produce their proposed budget cuts totaling $35 billion. The House and Senate will each merge those committee bills into a single bill, and the House and Senate would then consider their chamber's version of the bill soon after.
Tax Cuts
The other reconciliation bill--to cut taxes--will be considered shortly thereafter. That bill will include extension of the dividend and capital gains tax cuts through 2010, with almost $23 billion going to those at the top of the income scale. Most of these tax cuts benefit the wealthiest of our society. For example, the top 3 percent of households--those earning above $200,000 a year--receive nearly 80 percent of the dividend and capital gains tax breaks, and more than half of the value of the tax cuts is going to households earning more than $1 million a year--only .02 percent of all households.
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Congress is also considering a permanent repeal of the estate tax, which would have a severe effect on the economy, especially the deficit. According to Congress's Joint Committee on Taxation, extending the estate tax repeal after 2010 would cost $290 billion in lost revenue for the five years following, adding up to $745 billion in lost revenue through the year 2021. Including the cost of higher interest payments on the national debt, the total cost of repealing the estate tax is almost $1 trillion dollars.
The Debate in Congress
Since the delay was announced, leaders in Congress have been split on how to proceed. Some conservatives argue for deeper cuts in entitlement programs and other domestic programs, called domestic discretionary programs--those programs funded through the annual appropriations process--to offset the costs associated with hurricane relief and rebuilding efforts.
Other lawmakers--both Republicans and Democrats--have called for abandoning budget cuts in low-income programs, and the entire budget-cutting reconciliation bill, arguing that in light of what the hurricane showed us about poverty in America, we should not be cutting programs for vulnerable families.