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GOP Budget Cuts Just Pass House

After a whole day and half the night of tinkering and arm twisting, Republican leaders managed to barely pass a bill to trim $50 billion from Medicaid, food stamps and subsidies for student loans early Friday morning. It followed an embarrassing loss on a bill that would have made cuts in education and health programs.

To get votes, GOP leaders had to give up drilling in the Arctic wildlife refuge – but it could come back in negotiations with the Senate, reports CBS News correspondent Bob Fuss.

Still, House Speaker Dennis Hastert, R-Ill., and Acting Majority Leader Roy Blunt, R-Mo., were buoyant — if exhausted — after sweating out a big victory on the budget cut bill.

After all, they had just salvaged — at least for the moment — a major pillar of their agenda despite divisions within the party and nervousness among moderates that the vote could cost them in next year's elections.

The bill, passed 217-215 after a 25-minute-long roll call, makes modest but politically painful cuts across an array of programs for the poor, students and farmers.

President Bush, at a summit in Busan, South Korea, called the budget plan "a significant savings package that will restrain spending and keep us on track to cut the deficit in half by 2009." He urged House and Senate negotiators to reach prompt agreement.

The victory on the deficit-control bill came hours after an embarrassing and rare defeat on a $602 billion spending bill for education, health care and job training programs this year. The earlier 224-209 vote halted what had been a steady drive to complete annual appropriations bills freezing many agency budgets.

The broader budget bill would slice almost $50 billion from the deficit by the end of the decade by curbing rapidly growing benefit programs such as Medicaid, food stamps and student loan subsidies. Republicans said reining in such programs whose costs spiral upward each year automatically is the first step to restoring fiscal discipline.

"This unchecked spending is growing faster than our economy, faster than inflation, and far beyond our means to sustain it," said Budget Committee Chairman Jim Nussle, R-Iowa.

In passing the bill, Republicans buffed up their party's budget-cutting credentials as they try to reduce a deficit swelled by spending on the Iraq war and Hurricane Katrina. Democrats countered that a companion tax bill that could advance as early as Friday would more than eat up the savings.

The budget plan squeaked through after an all-day search by Hastert, Blunt and others to round up votes from reluctant moderates and other lawmakers uneasy with the bill.

House leaders now face arduous talks with the Senate, which passed a much more modest plan earlier this month. Negotiators face difficult negotiations over Arctic drilling, Medicaid and student loans, among other issues

Fourteen Republicans voted "no," including several who had harshly condemned the bill in the days leading up to the vote.

To win House approval, Hastert ordered modest concessions on plans to limit eligibility for food stamps and require the poorest Medicaid patients to pay more for their care. He ordered killed a provision to deny free school lunches to about 40,000 children whose parents would lose their food stamps.

The biggest concession came Thursday evening with inclusion of language to permit food stamp recipients making the transition from welfare to work to continue to be able to receive non-cash benefits for child care, transportation and housing without losing their nutrition benefits.

The bill drew unanimous opposition from Democrats, who objected to both cuts in programs for the poor and the fact that the deficit-reduction bill would increase the deficit when combined with a tax bill slated for a vote later that would extend tax cuts on capital gains and dividend income due to expire at the end of 2008.

The overall bill would cut the deficit through a combination of new revenues from auctioning television airwaves to wireless companies and myriad cuts to entitlement programs like Medicaid.

The earlier concession to moderates involved leaving co-payments for the poorest Medicaid beneficiaries at $3 instead of raising them to $5. A provision denying Medicaid nursing home benefits to people with home equity of $500,000 or more was modified by raising the equity standard to $750,000 or more.

Those changes came on top of concessions last week when Republican leaders, to appease moderates in their party, dropped provisions to open ANWR to oil drilling and to allow states to lift a moratorium on oil drilling off the Atlantic and Pacific coasts.

Despite the changes, the core of the five year, $50 billion deficit-reduction bill remains intact. The liberal-leaning Center on Budget and Policy Priorities estimated that the last minute changes only eased the cuts aimed at the poor by 2 percent from the original version.

On Medicaid, the bill would generate almost $12 billion in savings through new cost-sharing burdens on beneficiaries and by letting states scale back coverage. It also would tighten rules designed to limit the ability of elderly people to shed assets to qualify for nursing home care. The bill also reduces pharmacy profit margins and encourages pharmacies to issue generic drugs.

On student loans, provisions to increase interest rates and fees paid by student and parent borrowers would contribute up to $14.3 billion in savings.

The deficit-reduction bill is the first effort in eight years to take on the automatic growth of mandatory programs like Medicaid, which make up about 55 percent of the budget. By comparison, the annual appropriations bills fund about one-third of the budget.

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