WASHINGTON (AP) -- Congressional Democrats sealed an agreement Monday night on a budget plan that would help President Barack Obama overhaul the health care system but allows his signature tax cut for most workers to expire after next year.
Senate Budget Committee Chairman Kent Conrad, D-N.D., announced the agreement and key details in a statement.
Most importantly, the congressional budget plan would prevent Senate Republicans from delaying or blocking Obama's plan to vastly expand government-subsidized health care when it advances this fall.
The $3.5 trillion plan for the budget year starting Oct. 1 embraces several of Obama's key goals besides health care reform, including funds for domestic programs and clean energy, and a tax increase for individuals making more than $200,000 a year or couples making more than $250,000.
But the plan would allow Obama's signature $400 tax cut for most workers and $800 for couples to expire at the end of next year. Even after squeezing the defense and war budgets to levels that are probably unrealistic, the plan would cause a deficit of $523 billion in five years.
"I think this is a good budget," Conrad said. But, he added, "much more will have to be done to get us on a more sustainable course," including slowing the growth of benefit programs like Medicare and overhauling the tax code.
Conrad forced cuts of $10 billion from Obama's $50 billion boost for non-defense programs funded by Congress each year - not much in the grand scheme but strongly resisted by House Appropriations Committee Chairman David Obey, D-Wis. Future increases for non-defense operating budgets would be far less generous than Obama's budget, averaging 2.9 percent, though history would suggest that Congress won't follow through on the long-term promises.
While endorsing Obama initiatives, Democrats focused a lot of attention to preserving President George W. Bush's tax cuts for middle-class workers, investors and families with children.
The budget plan would patch the alternative minimum tax for three years to prevent more than 20 million taxpayers from getting socked with increases averaging $2,000 or so. The estate tax would be kept at current levels and allow for estates up to $7 million to be exempt from the tax with a 45 percent rate applying to inheritances above that.
Under Capitol Hill's arcane rules, the annual congressional budget produces an outline for follow-up tax and spending legislation. Most importantly, the measure would allow Obama's health plan to pass the Senate by a simple majority instead of the 60 votes that are needed for plenty of other legislation.
Democrats and independent allies control 58 Senate seats.
Democrats hope the House will adopt the budget on Tuesday and the Senate on Wednesday, which marks Obama's 100 days in office.
Obama and his Democratic allies say they still want support from Republicans for health care legislation but need the option of expedited action in case the debate becomes overly partisan.
"For this bipartisan process to take root, Republicans must demonstrate a sincere interest in legislating," Senate Majority Leader Harry Reid, D-Nev., wrote in a letter Monday to GOP Leader Mitch McConnell of Kentucky. "Rather than just saying no, you must be willing to offer concrete and constructive proposals."
The fast-track rules also would apply to Obama's plan to eliminate lender subsidies on banks and other lenders presently participating in the federal student loan program. Direct lending by the government would replace the program, with the savings dedicated to boosting Pell Grants for lower-income college students.
While handing Obama a victory, there is still an extraordinary amount of work before Obama's vision of health care reform becomes a reality, including raising taxes and cutting spending to generate $1 trillion or more over the next decade to fund the health care initiative.
The budget plan also anticipates the expiration of former President George W. Bush's tax cuts on wealthier people's income and investments at the end of next year. But it ignores Obama's calls for raising taxes to help pay for his health care initiative by reducing the benefits wealthier people take on itemized deductions like charitable gifts and mortgage interest.
Moderate Democrats successfully pressed for Obama to endorse their call for a pay-as-you-go law that would require taxes and new spending on benefit programs to be offset with tax increases or spending cuts elsewhere in the budget.
The obstacle for the pay-go extension is the Senate, but the moderate gang of "Blue Dog" Democrats won a promise from House Speaker Nancy Pelosi, D-Calif., that she would exert leverage over the Senate aimed at winning enactment of a pay-go statute. The existing pay-as-you-go provision is simply a rule that has been waived on key occasions.
