SETTING THE BUDGET

The Senate passed a budget resolution Wednesday that properly lowered the amount set aside for tax cuts, but the debate over the course of federal spending for the next decade isn’t nearly over. With a House resolution containing both the president’s massive tax cut and cuts in social programs to pay for it, the Senate must exert itself to ensure a more sensible plan prevails. Maine’s two moderate Republican senators will be crucial to the outcome.

Senators can begin in the conference with the House to reconcile the two proposed resolutions. Unlike the House, Senate members had the advantage of voting after the down payment for the war had been provided by the White House: $74.7 billion. Even if allies help out and Iraqi oil pays for some of the cost, no one expects this to be the final figure. And sending more troops and materiel to Iraq, as was a reported possibility yesterday, raises the price of war even higher and, likely, the price of rebuilding after the war.

Having narrowly passed the president’s full tax package, the House was forthright enough to say how it would try to pay for it, including by making cuts in programs to veterans, in Medicare, Medicaid, food stamps and farm programs. Assuming the House and Senate compromise between the Senate’s $350 billion and the House’s $726 billion, the survival of these programs will be at the center of the debate. The Senate raised similar issues in a long series of votes this week on establishing levels of funding for such programs as special and vocational education, Medicare and Medicaid, work force training and the child-tax credit.

Sen. Susan Collins supported many of these; Sen. Olympia Snowe, who committed herself to the $350 billion tax level with the rest of the planned cut going to protect Social Security, backed fewer. But the amendment votes do not bind the Senate to a specific funding amount, and both have been consistently supportive of the programs when the votes have translated into actual dollars.

The Senate’s decision to reduce the size of the administration’s tax package was reported as a personal rebuke to the president, which was unfortunate because the characterization could cause views to become hardened just as so much new information is available. The cost of the war and its effect on the deficit are the most obvious changes. But also for the first time the nonpartisan Congressional Budget Office used “dynamic” scoring, long favored by the GOP, to examine the president’s budget. Dynamic scoring takes into account likely growth that can offset tax cuts and help pay for them. Only in this case, the CBO showed that even when counting the effect of the stimulus, deficits under the budget would run to more than $1 trillion over just the next five years.

Another sign that Congress should think again about underfunding programs: James E. Glassman of J.P. Morgan Chase Securities last week attributed a substantial part of the nation’s economic growth to spending on programs like homeland security and defense. “Half of this year’s fiscal boost come from new federal outlays, not from [the 2001] tax cuts,” he said. His view was supported by the Commerce Department, which concluded half the growth in the gross domestic product was due to federal spending, mostly defense.

A targeted jump in federal and state budgets could serve as needed stimulus for the economy without creating a deficit that kills the chance for reform of programs like Medicare and welfare. To have the flexibility to do this, the Senate must stand against the House’s higher tax cut and the cutting of essential services.