It seems likely there will be an unusual, "creative" Budget Resolution this week to deal with the problems encountered by the President`s proposal to get some supply-side tax cuts out of Congress. At the moment, it looks like a Budget Resolution will come out of conference and be voted on this week that provides for TWO different provisions on tax cuts, one for the Senate and one for the House. A parliamentarian ruled it would be okay to do so, as the resolution itself does not have the force of law. What it does is provide for an overall BR, but with provision for $350 billion in tax cuts on the Senate side and $550 billion on the House side. As long as the tax-writing committees eventually produce a House-Senate conference that lies somewhere between those two numbers, the amount will not be subject to a filibuster. Wall Street did not seem to like the outcome as it dropped quickly on the news, even in the fact of further promising reports from Iraq on an end to the war.
Given the alternatives, though, this is probably the best possible outcome for the stalemate on the Hill, where the administration is still two votes short of the 50 it would need to pass a tax bill higher than $350 billion through the Senate. The net effect is to pass a BR instead of living without one, which might mean tax cuts even lower than $350 billion. And there is always the possibility that something will change in the next few months to produce the needed votes. There is also the possibility the administration will decide to "move the furniture around" inside the tax package, kicking out the no-growth "tax cuts" and replacing them with the growth measures, including the double-tax on dividends. The House Ways & Means Committee will begin marking up a bill when Congress returns from the two-week recess it begins this weekend. The plan is to have a tax bill through House and Senate into a conference by Memorial Day and have a final bill pass before the July 4 recess. While all this is happening, of course, the news from the foreign front will be changing, for better or worse.
It is worth noting that the Republican Party has really held together on tax cuts, with only four defections in the Senate and roughly 15 "moderates" in the House preferring no tax cuts. The New York Times today gave half its op-ed page to the "conservative" Concord Coalition, which argues for no tax cuts at all in the face of screaming budget deficits. It only points out how far the GOP has distanced itself from the Concord Coalition`s Old Time Religion and embraced supply-side tax cuts. What we will look for now is that "furniture move," to pack as many growth measures as possible into the tax package as possible, which would make it harder for moderate Democrats like Breaux of Louisiana and some of the presidential candidates to vote "no" on the compromise. We'll try to keep on top of this even during the recess, when some of these tactical decisions will have to be made.