Bush wins big in Congress — but at a cost

WASHINGTON — As Congress stumbles toward Christmas, President Bush is scoring victory after victory over his Democratic adversaries. He:

• Beat back domestic spending increases.

• Thwarted an expansion of children's health coverage.

• Defeated tax increases.

• Won Iraq war funding.

• Pushed Democrats toward shattering their pledge not to add to the federal deficit with new tax cuts or rises in mandatory spending.

But the cost of those wins could be high, for the federal debt and the president's priorities.

Bush's resolute opposition to tax increases could raise the federal debt this fiscal year by nearly $240 billion. And as Democrats struggle to meet his demands, they are jettisoning programs the president has championed.

Even some Republicans bristle at the president's inflexibility. Bush has pledged never to sign bills with tax increases, even ones he once supported.

"I see the president trying to play catch-up in two years for not vetoing anything in the first six years, and probably regretting that he treated the Republican Congress with softer gloves than he did a Democrat Congress," said Sen. Charles Grassley of Iowa, the conservative ranking Republican on the Senate Finance Committee. "He's kind of waking up to the necessity of having a certain policy that ought to be consistently followed, even if it's irrational."

In his first six years in office, Bush accepted domestic discretionary spending increases from Republican-controlled Congresses that averaged 7 percent a year, said Brian Riedl, a conservative budget analyst at the Heritage Foundation. With the current Democratic Congress, the president is insisting on spending growth of 4 percent at most.

"The Democrats are learning this isn't the early 1970s, when the Republican Party was Gerald Ford and 140 of his friends," said Oklahoma Rep. Tom Cole, chairman of the National Republican Congressional Committee. "There are 201 of us, and we will be heard."

$239 billion more debt?

While Bush stood his ground against $22 billion in additional domestic spending and then against $11 billion, he also opposed Democratic efforts to raise taxes to recoup the cost of a $50 billion measure that would limit the alternative minimum tax (AMT).

The parallel tax system was created in 1969 to ensure that a few rich Americans could not avoid paying taxes altogether, but because it was not indexed to inflation, it threatens more than 20 million upper-middle-income households.

If, as expected, Congress passes an AMT bill without making up the lost revenue, the cost to the Treasury would swamp the savings from Bush's spending fight.

The president also has taken to the White House's bully pulpit week after week to demand nearly $200 billion for the wars in Iraq and Afghanistan, without tax increases or spending cuts. If he prevails on all three fronts, he will end up adding roughly $239 billion to the federal deficit this fiscal year.

"I have difficulty seeing how $11 billion or $22 billion in discretionary spending on the domestic side of the equation is so fiscally irresponsible when juxtaposed against these major AMT provisions of $50 billion, or certainly against the $70-plus billion they want for the global war on terror, Iraq and Afghanistan," said G. William Hoagland, a GOP budget adviser to former Senate Majority Leader Bill Frist. "It doesn't pass the sensible man's test."

Where Bush might lose

As Democrats shuffle funds to meet Bush's bottom line, congressional aides said Friday the White House also is likely to lose in certain areas:

• A cut by half of $3 billion the president requested for his Millennium Challenge, an effort to increase development assistance to poor nations.

• Substantial cuts to Bush's program to resume the reprocessing of nuclear waste.

• Elimination of a $579 million increase for math and science instruction under the No Child Left Behind initiative.

• Cuts to first lady Laura Bush's Reading First program.

Bush's victory against much of the Democrats' energy bill also came at a price. A comprehensive energy bill will be signed into law, but the president defeated $21 billion in revenue increases that would have paid for tax incentives to support renewable energy, conservation and other programs Bush had supported.

"It's ridiculous," Grassley said. "He has compromised his own position."

The biggest revenue raiser would have done away with a tax incentive that the five largest oil companies have enjoyed for three years. That break came about as Congress was considering tax incentives to spur manufacturing exports; oil companies — among the country's largest importers — successfully lobbied to be declared "manufacturers."

At the time, Bush opposed more tax incentives. "I will tell you, with $55 oil, we don't need incentives to oil and gas companies to explore," he told newspaper editors. "There are plenty of incentives."

Grassley said Bush repeated that position to him in 2006.

This time around, Bush and GOP leaders said a repeal of such incentives would amount to a "massive" tax increase.

The tussle over AMT

Bush's aversion to any tax increase — no matter the size or the target — led directly to the death of a number of measures. Bush opposed a Democratic plan to pay for the AMT "patch," largely by forcing wealthy managers of hedge and private-equity funds to pay ordinary income-tax rates on their earnings. Currently that income is classified as capital gains and taxed at 15 percent.

When that measure fell to a filibuster, Democrats tried again, this time paying for the AMT bill by preventing hedge-fund managers from using offshore tax havens. Again, Bush opposed it.

Democrats said Bush was not formerly so averse to using tax increases to deal with losses from the AMT. In 2005, he empanelled a tax-overhaul commission, entrusting it to, among other things, repeal the AMT without costing the Treasury any revenue.

That would have meant eliminating a tax that brings in $1 trillion over 10 years and making up the lost revenue with tax increases somewhere, said Tom Kahn, Democratic staff director of the House Budget Committee.