Congress approved a record $2.27 trillion federal budget Friday, winning a razor-thin Senate victory after Republican leaders promised to limit new tax cuts to half the amount President Bush has proposed.
With lawmakers eager to begin a two-week recess, the Senate passed the budget on a vote that required Vice President Dick Cheney to break a 50-50 tie. The House had approved it a few hours before dawn.
The budget language allows for new tax cuts up to $550 billion over the next decade, a figure supported by the House in an effort to win over more senators.
However, moderate GOP Sen. Olympia Snowe of Maine demanded and received promises from her party's leader that any tax cut bill sent to the White House won't exceed $350 billion. Bush's proposal is for $726 billion, reductions he says are needed to revive the economy.
Senate Finance Committee Chairman Charles Grassley, R-Iowa, assured Snowe that he and Majority Leader Bill Frist of Tennessee would not support a larger cut.
"There would be no budget and no growth package without our agreement," Grassley said, expressing regret that the reductions would not be larger.
Meanwhile, House and Senate negotiators were still working to break a stalemate over millions of dollars in projects attached to separate legislation to spend $80 billion for war and domestic security. That bill would make a $2.5 billion down payment on the costs of reconstruction in Iraq and give $3.1 billion in aid to the airline industry and its laid-off workers.
Lawmakers want to complete both measures before a two-week spring recess and were aiming to conclude their efforts as soon as this weekend. The House and Senate will return from the break to settle deep differences between the chambers over key pieces of the president's domestic policy.
Also on Friday, the House passed a comprehensive energy package that would allow oil exploration in an Alaska wildlife refuge, one of Cheney's top priorities. The Senate rejected the Alaska drilling policy last month.
The House also sides more closely with the administration on taxes, having passed a budget would allow cuts of as much as $550 billion through 2013. Last month, the House agreed to all of the $726 billion that Bush says is needed. But after the deal struck in the Senate on Friday, House tax-writers will have to accept smaller reductions.
The Senate has shown little appetite for passing a large tax cut this year and voted earlier to slash the president's original plan to $350 billion. Moderate Republican Snowe of Maine and George Voinovich of Ohio refused to accept anything more.
Acknowledging the impasse between the House and the Senate, Grassley persuaded Senate Republican leaders to back the smaller cut.
"As much as I wish it weren't so, that is the political reality," Grassley said while announcing the budget deal. "The reality is that the Republican caucus is split."
"Logic prevailed," Voinovich said.
The House voted narrowly, 216-211, to pass the budget early Friday morning.
Grassley said he would use the $350 billion to accelerate already scheduled income tax reductions, marriage penalty relief and child tax credit increases. He also plans to allow small businesses to write off more of their new investments.
The Senate will not have room to include the president's proposal to reduce taxes on corporate dividends unless its cost is offset by increasing taxes or closing tax loopholes.
The budget is a nonbinding resolution used by Congress to outline tax and spending policy. It projects deficits will peak next year at $385 billion, then decrease gradually until a $10 billion surplus is reached in 2012.
It permits the spending controlled by Congress to grow less than 3 percent next year, to $785 billion. More than half that money — $400 billion — will go to defense.
The blueprint also budgets $400 billion for lawmakers to develop a Medicare prescription drug benefit later this year.