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A budget blueprint ... now the hard part

Democrats reached an accord after weeks of talks. But the $2.9 trillion plan faces GOP critics and Bush veto threats.

WASHINGTON - Democrats controlling Congress presented a $2.9 trillion budget blueprint yesterday, ensuring a confrontation with President Bush over spending boosts for education and other domestic programs.

The Democratic plan promises a budget surplus in five years but would achieve it only by allowing some of Bush's tax cuts to expire.

The nonbinding plan for next year faces House and Senate votes today. Democrats agreed to it after weeks of private negotiations between the chairmen of the House and Senate Budget Committees. The House and Senate passed competing budgets in March.

The most immediate result would be to clear the way for action this summer on annual spending bills totaling $1.1 trillion for the budget year that begins Oct. 1. That figure includes $145 billion in sure-to-be-contested money for military operations in Iraq and Afghanistan.

A $23 billion increase for domestic agency budgets awards sizable increases for education, veterans and health-care programs.

The White House opposes the increase and has promised vetoes of annual spending bills that break Bush's budget for such programs. His spending plan essentially would freeze them.

After a $214 billion deficit for the current budget year, the deficit would rise to $252 billion for 2008 but fall to $235 billion the next year, according to the Democrats' plan.

'Pay as you go'

But by 2012, the Democratic budget promises a $41 billion surplus. It does so by assuming that taxes on income, dividends and stock sales go up in 2011 instead of being extended, as Republicans and Bush call for.

Republicans credit the tax cuts, passed in 2001 and 2003, with reviving the economy. Most Democrats say the tax cuts favor wealthier people.

Tax cuts aimed at the middle class could be renewed under the compromise. That includes establishing a 10 percent rate on the first $12,000 of a couple's income, as well as relief for married couples, people with children, and people who inherit large estates.

Extending the middle-class tax cuts would cost about $180 billion over 2011-12; extending the rest of the 2001 and 2003 tax bills would cost about $240 billion over the same period.

The Democratic plan would restore a "pay-as-you-go" rule, requiring that tax cuts or spending increases in benefit programs such as Medicare, children's health care or farm subsidies be financed by spending cuts or tax increases elsewhere. The idea is to not worsen the deficit.

Taking a pass

The budget plan, while nonbinding, sets goals for later tax and spending bills. It makes a statement about the priorities of majority Democrats and provides an early test for the party to prove it can govern.

But the need to pass the budget exclusively with Democratic votes forced lawmakers such as Senate Budget Chairman Kent Conrad (D., N.D.) and his House counterpart, Rep. John M. Spratt Jr. (D., S.C.), to draw up a document with few if any politically risky initiatives.

Democrats took a pass on overhauling federal retirement programs such as Social Security and Medicare. Those programs face the threat of insolvency in the decades ahead as baby boomers retire.

Instead, Democrats hope to address shortfalls in benefit programs after the 2008 election as part of broader talks that also would determine the future of the Bush tax cuts.

"It's not the grand solution," Spratt said, "but it's a good step in the right direction."

The Senate committee's top Republican, Sen. Judd Gregg of New Hampshire, said the Democratic plan would produce "the largest tax increase in U.S. history, billions in new spending, and no attempt to address the long-term fiscal crisis" in retirement programs and Medicaid, the health-care program for the poor and disabled.