Senate passes deficit reduction

WASHINGTON — The Senate approved sweeping deficit-reduction legislation Thursday that would save roughly $35 billion over the next five years by cutting federal spending on prescription drugs, agriculture supports and student loans, while clamping down on fraud in the Medicaid program.

The Senate bill, which passed 52-47, is the first in nearly a decade to tackle the growth of entitlement spending, the part of the federal budget that rises automatically based on set formulas and population changes.

It would shave payments to some farmers by 2.5 percent, while eliminating a major cotton-support program and trimming agriculture-conservation spending. The measure passed largely along party lines, with two Democrats voting for it and five Republicans voting against it. Both of Washington state's senators, Democrats Patty Murray and Maria Cantwell, voted against the bill.

Thursday's action was part of an effort by congressional Republicans to demonstrate fiscal discipline in the wake of widespread complaints of profligate spending on Capitol Hill. Although many Democrats and some moderate Republicans are concerned that the effort may go too far, prominent Republicans in the Senate and House said the cuts were necessary to slow the rate of spending and control a deficit projected to total $314 billion by the end of the fiscal year.

Digital TV auction

The Senate bill would raise billions of dollars by auctioning off parts of the broadcasting spectrum for digital television. Companies with traditional pension plans would be charged higher premiums for insurance coverage under the Pension Benefit Guaranty Corp. And the profits of student lenders would be squeezed by $9.7 billion over five years.

Some of the savings would be spent on relief for Hurricane Katrina survivors and higher payments to health-care providers helping Medicare patients.

The focus now shifts to the House, where the Budget Committee voted 21-16 Thursday to approve a bill that would save nearly $54 billion through 2010 with cuts to Medicaid, food stamps, student loans, agriculture subsidies and child-support enforcement. The House measure would allow states to impose premiums and co-payments on poor Medicaid recipients for the first time.

With so many controversial provisions, the House measure is forcing Republican leaders to scramble for support in what could be the most difficult vote of the year. Some Republican moderates are balking at cuts to anti-poverty programs, especially in light of a $70 billion tax cut that could come to a vote soon after the budget bill, more than wiping out the first bill's deficit reduction.

Other Republicans usually in the leadership's camp are protesting measures with regional implications, such as a provision that would end a moratorium on offshore oil drilling and another that would halt the practice of sending some import duties to companies hurt by unfair trade practices. And environmentalists are making a last stand to keep oil exploration out of the Arctic National Wildlife Refuge.

"There are a dozen issues, any one of which could break this deal," said Rep. Adam Putnam, R-Fla., a budget committee member. "This is going to be a heavy lift."

Among the deepest cuts are those hitting Medicare and Medicaid. The House bill would cut the growth of Medicaid by $12 billion over five years and by nearly $48 billion over the next decade, according to the nonpartisan Congressional Budget Office (CBO). The Senate would cut spending on Medicaid and the related Children's Health Insurance Program by $4.3 billion through 2010, and $14 billion through 2015. The Senate measure mitigates cuts to health-care programs for the poor by shifting the bulk of cost savings to Medicare, which would be cut by $5.7 billion over five years. That savings would balloon to $40.6 billion through 2015.

Beneficiaries protected

Even liberal advocacy groups say the Senate measure largely shields Medicare and Medicaid beneficiaries from any pain, imposing it instead on pharmaceutical companies, private insurers and more affluent Americans who fraudulently qualify for nursing-home coverage by transferring assets to family members. But the Senate Medicare provisions have prompted a veto threat from the White House, which has strongly objected to the bill's tampering with President Bush's Medicare prescription-drug benefit.

The Senate bill would save $35 billion over the next decade by eliminating financial incentives to lure managed-care companies into Medicare. The White House called those enticements "critical."

The House's Medicaid cuts present a far more immediate political obstacle. By allowing states to impose new co-payments and premiums while scaling back some benefits, the legislation is expected to save more than $30 billion over 10 years, the CBO said, not because cost-sharing would bring in revenue but because new costs would keep the poor out of the health-care system.

In the Senate, the two Democrats supporting Thursday's budget measure were Mary Landrieu of Louisiana and Ben Nelson of Nebraska. The five Republicans voting no were Lincoln Chafee of Rhode Island; Susan Collins and Olympia Snowe, both of Maine; Mike DeWine of Ohio; and Norm Coleman of Minnesota.