Senate Restores Medicaid Cuts

The Senate voted Thursday to strip all proposed Medicaid cuts from the $2.6 trillion budget for next year, jeopardizing the heart of the plan's deficit reduction in an embarrassing setback to President Bush and Republican leaders.

The change, whose chief sponsor was moderate Sen. Gordon Smith, R-Ore., was approved 52-48 after days of heavy lobbying by both sides. It was widely seen as a test of the GOP-run Congress' taste for making even moderate reductions in popular benefit programs that consume two-thirds of the budget and are growing rapidly.

The Medicaid cuts could still be revived when the House and Senate try writing a compromise budget next month. The more conservative House approved a budget Thursday by 218-214 that is tougher on domestic spending than the Senate is, including up to $20 billion in Medicaid savings.

Smith did not rule out living with a compromise, telling reporters after the vote, "We have to have a budget. I'm going to vote for the budget."

The budget sets overall tax and spending targets to guide Congress as it writes bills later in the year that make actual changes in programs and tax laws.

By their vote, senators deleted the $14 billion in five-year reductions that Senate Budget Committee Chairman Judd Gregg, R-N.H., included in his fiscal outline.

That would be a 1 percent reduction from the $1.12 trillion the federal-state health care program for the poor and disabled is expected to spend in federal funds during that period. Instead, a commission would be appointed to study the program for a year.

"This one cries for the most care" in making a decision, said Smith, whose amendment was co-sponsored by Sen. Jeff Bingaman, D-N.M. "Because it involves the halt, the lame, the poor, the blind, the needy, those who have no recourse."

Gregg called claims that Medicaid cuts would hurt people "absurd, misleading" and "just scare tactics."

With elections next year, Gregg predicted the vote meant there would be no serious effort to squeeze savings from benefit programs for many years. And he launched what seemed almost like a personal criticism at Smith for an amendment he said would "gut the only thing in this budget" that would force fiscal discipline.

"And it's being done by Republicans," Gregg said. "You just have to ask yourself, how they get up in the morning and look in the mirror?"

Joining Smith were all 44 Democrats, independent James Jeffords of Vermont and GOP Sens. Lincoln Chafee of Rhode Island, Norm Coleman of Minnesota, Susan Collins and Olympia Snowe of Maine, Mike DeWine of Ohio, and Arlen Specter of Pennsylvania.

Following Mr. Bush's lead, the Senate Republicans made the proposed Medicaid reductions the keystone of their plan to save $32 billion from benefit programs over the next five years. Overall, such programs are the biggest and fastest growing part of the budget, and Republicans have targeted them in an effort to slowly reduce record federal deficits.

The showdown occurred as the House and Senate moved toward completing similar $2.6 trillion budgets for 2006.

House GOP leaders cleared the last hurdle to final passage by striking a deal with conservatives to allow procedural votes on whether to kill spending bills that exceed budget limits.

Generally following the approach Mr. Bush charted in his budget last month, both chambers' fiscal outlines would cut a wide range of domestic programs in an effort to reduce slowly deficits that soared to a record $412 billion last year. Defense and domestic anti-terrorism programs would get increased funds.

In addition, Mr. Bush wants five-year tax cuts totaling $100 billion. The House budget makes room for $106 billion in tax cuts, the more moderate Senate $70 billion.

By 50-50 — a vote shy of the majority needed — Democrats and moderate Republicans narrowly lost an effort Wednesday to require any new tax cuts be paid for with revenue increases or spending reductions. Though GOP leaders prevailed in defending one of Mr. Bush's top priorities, the vote showed how tenuous Senate support is for a fresh round of tax cuts.

For the first time since 1997, the House and Senate both want to carve savings out of benefit programs, which consume nearly two-thirds of the federal budget and are growing rapidly. Social Security, Medicare and Medicaid are the biggest, but neither Social Security or Medicare are on the chopping block this year.

Overall, these programs are projected to spend $7.7 trillion over the next five years. By law, they pay benefits to anyone who qualifies and cover inflation and growing numbers of recipients, so their spending increases automatically every year.

Mr. Bush proposed saving $51 billion from benefit programs over the next five years, including from Medicaid, farm aid, student loans and fees on employers to support the fiscally ailing federal agency that backs private pension plans. The House budget calls for $69 billion in savings, the Senate's $32 billion.