Democrats face tough budget fight

House Democrats are facing a much tighter vote on the budget resolution in 2010 because of big deficit projections and the looming midterm election.

As a result, centrist Democrats will have a harder time voting for the resolution, which sets discretionary spending levels and previews the federal government's fiscal situation for the next few years. 

President Barack Obama's budget request would lead to annual deficits near $1 trillion for the next decade, according to the Congressional Budget Office.

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The bruising healthcare debate makes the vote even tougher, given GOP arguments that the $940 billion bill will increase spending over time.

“[The budget] is always a challenge even in the best of circumstances,” said William Hoagland, a former Senate Republican budget aide. “Now it’s an election year and everything is stirred up because of healthcare.”

The difficulty of threading another contentious measure through the House this spring raises the odds Congress won’t end up with any resolution.

“People are going to think, why should I get a budget when I'm going to get attacked, when people are going to see deficits of $1 trillion,” said Jim Horney, a former Senate Democratic budget aide.

House Democratic leaders are “working with our caucus on a budget that builds on our fiscal responsibility efforts,” according to an aide to House Majority Leader Steny Hoyer (D-Md.). The chairmen of the House and Senate budget committees, Rep. John Spratt (D-S.C.) and Sen. Kent Conrad (D-N.D.), have also said they're planning to produce a resolution. 

Winning the support of fiscally conservative Blue Dog Democrats will be a key for leadership.

Senior Blue Dogs signed on to last year’s resolution only after Speaker Nancy Pelosi (D-Calif.) and House Majority Leader Steny Hoyer (D-Md.) pledged to press for a statutory pay-as-you-go measure. The pay-go law, which requires that new tax cuts or entitlement spending be offset with other spending cuts or tax hikes, was signed into law by the president earlier this year.

Blue Dogs have proposed a balanced budget amendment and across-the-board spending cuts, seeking to go further than the freeze on non-security discretionary spending Obama has proposed. 

The Hoyer aide said the budget would include the deficit reductions in the healthcare bill and consider the president's freeze proposal, ways to strengthen the pay-go law and investments in “priorities like education and innovation.”

Going without a budget resolution isn't unprecedented; Republicans failed to pass a budget through both chambers in 2006, the last year they controlled Congress. 

“It's not clear what the consequences of not doing a resolution is,” said Horney, who now serves as director of federal fiscal policy at the Center on Budget and Policy Priorities.

“Clearly, it doesn't make the majority party look good. But if the case is the deficits are going to be too high anyway, they might decide this is the lesser of two evils.”

Another option could be for House Democrats to wait for the Senate to act first.

Because the budget resolution isn't subject to a Senate filibuster and can pass with a simple majority in the upper chamber, Senate Democrats would likely have an easier time producing a resolution than House members.

Pelosi declared in January that she’s in “campaign mode” and will look to shield House Democrats from making tough votes on measures the Senate may not act on.

By successfully ushering a budget resolution through Congress, Democrats can show voters they're willing to make tough choices about the country's fiscal situation.

“This is where Democrats can show what they have planned to bring the nation back to a responsible place in the budget,” said Anne Kim, a former Blue Dog aide and now the economic program director for Third Way. 

Skipping the budget resolution could hurt Democrats facing tough races this fall, particularly Spratt, whose primary annual duty as House Budget chairman is shepherding a blueprint through the lower chamber, said Steve Ellis, vice president of spending watchdog Taxpayers for Common Sense. 

Forgoing a resolution would also keep Democrats from using budget reconciliation instructions to pass big-ticket items, such as the extension of expiring middle-class tax cuts, through the Senate on a simple majority vote.

But crafting a budget with deficit levels that centrists can vote for would likely mean spending cuts or new taxes. 

Obama’s budget request would produce deficits that would drop only to a level equivalent to 4 percent of the gross domestic product. That's higher than Obama’s own 3 percent deficit-to-GDP goal. 

The CBO projects the 2010 deficit to be $1.5 trillion, a bit more than 10 percent of GDP.

Bailouts under both the Bush and Obama administrations and the Democrats' $787 billion stimulus measure, which CBO recently re-scored as $862 billion, account for less than one-third of the shortfall.

Most of those costs are expected to last for several years, making it hard to quickly cut deficits to pre-recession levels.

“If they tried to get down to they level of deficits people would agree to, that means you'd have spending decreases or revenue increases that themselves would be unpopular,” Horney said. “So it's a kind of 'damned if you do, damned if you don't' kind of year.”