U.S. Senate Approves Budget

By JANET HOOK And KRISTINA PETERSON

Updated March 23, 2013, 6:33 a.m. ET 

WASHINGTON—The Senate early Saturday passed its first formal budget in four years, defining Democrats' fiscal principles for the next, uncertain stage of Washington's battle over debt, spending and taxes.

Alex Brandon/Associated Press

The setting sun is reflected in the windows of the U.S. Capitol, on Capitol Hill, Friday.

The Democratic-drafted budget, approved narrowly a couple hours before dawn, calls for almost $1 trillion in new taxes over the next decade to help reduce the deficit. Although the budget is nonbinding and isn't likely to become law, it fleshes out Democrats' vision of a plan to reduce the deficit while protecting safety-net programs. The Senate passed the budget 50-49, largely along party lines.
"The solution to our fiscal challenges will not be found in deep cuts to programs that vulnerable families depend on," said Senate Budget Committee Chairman Patty Murray (D., Wash.) as she closed debate on the blueprint.
Republicans said the plan did too little to reduce the deficit, especially compared with House Republicans' plan to balance the budget in 10 years. "Honest people can disagree on policy, but there can be no disagreement on the need to change our debt course," said Sen. Jeff Sessions of Alabama, the ranking Republican on the Budget Committee. "The House budget changes our debt course, while the Senate budget does not."
The Senate approved the budget after voting on a slew of amendments stretched through the night. Among them, the Senate Friday adopted an amendment aimed at giving states more authority to collect sales taxes from out-of-state Internet retailers.
The budget plan was opposed by four Democrats who are up for re-election in 2014: Sen. Max Baucus (D., Mont.), Kay Hagan (D., N.C.), Mark Pryor (D., Ark.) and Mark Begich (D., Alaska). All of the Senate's Republicans voted against the plan and Sen. Frank Lautenberg (D., N.J.) didn't vote.
Congress will be out of town for a two-week spring recess after three months of budget wrangling in which Congress passed a major tax increase, raised the federal debt limit, allowed $85 billion in spending cuts to take effect and enacted a bill to keep the government operating through Sept. 30.
But the end of that flurry of activity is just the beginning of the next, more amorphous phase of budgeting. It isn't clear whether or how Democrats can bridge the vast differences between their Senate budget and the version passed by the Republican-controlled House Thursday. The GOP budget enshrines conservative fiscal principles that are anathema to Democrats, raising no taxes and making substantial cuts in Medicare and other safety-net programs.
It is unlikely that the differences will be resolved in textbook legislative fashion—through a House-Senate conference committee to negotiate a compromise. Instead, lawmakers predict any big budget deal would emerge from high-level negotiations with the White House. President Barack Obama has tried to reach out to Republicans who might be willing to work with him on a deficit-reduction deal that includes both tax increases and spending cuts. So far, nothing concrete has come of those efforts.
But members of both parties said that passage of the two budgets was a precondition to further progress, allowing both parties to speak to their political base before talking further with each other.
"No budget is going to be perfect for everyone, but this is a credible, important first step in the process," said Sen. Mark Warner (D., Va.), a Senate Budget Committee member who has supported deeper spending cuts in bipartisan deals. "I look forward to moving to the next stage."
The next pressure point comes this spring and summer, when Congress will have to raise the federal debt limit or else let the U.S. Treasury run out of cash to pay its bills. House Republicans say they won't approve any debt increase unless it is paired with matching budget cuts. House Speaker John Boehner (R., Ohio) has said his party's lawmakers will meet immediately after Congress returns in April to begin discussing what their price will be for raising the debt limit.
However, Mr. Obama has said he won't negotiate over that must-pass measure, and Republicans have been gun-shy about reviving their past strategy of threatening to delay a debt-limit increase to get their way.
Whenever or however a deal takes shape, the big questions are whether Mr. Obama is able to offer cuts in Medicare and other entitlement programs that are drastic enough to open the way for Republicans to compromise on taxes. And if so, whether there are enough Republicans open to including tax increases to build a majority without GOP leaders who are adamantly opposed.
The budget debate in the Senate laid bare the deep partisan divisions over numerous issues. Many amendments were rejected along strict party lines and were of little consequence because the entire budget is a nonbinding measure and destined not to become law.
Buried in the partisan onslaught, however, are two important tax proposals that came to test votes in the Senate for the first time. The first, passed Thursday, called for repealing a tax on medical devices that is part of Mr. Obama's health-care law; it passed by a wide bipartisan margin with support from many Democrats whose states are home to big device manufacturers.
The Senate approved an amendment that called for making it easier for states to collect sales tax from online retail sales. The measure opened divisions within both parties: Senators representing states that have sales taxes supported the amendment, while those from states that don't allied with online retailers in opposition to it.