Since 2000, the federal budget surplus of that year evaporated and before long was replaced by the three largest annual deficits in U.S. history in 2003 ($378 million), 2004 ($413 billion), and 2005 ($318 billion). On 7 January 2007, the total national public debt amounted to $8.7 trillion, or $28,820 for every person in the United States. Over this period, the two congressional panels charged with bringing fiscal discipline to government–the House and Senate Budget Committees–suffered a loss of authority and relevance. The annual budget resolutions they prepared were often dismissed by Republican-controlled congresses as the GOP approved emergency supplemental funding for the Iraq war, sizable reductions in taxes, and an expensive new Medicare prescription drug benefit without providing the means to cover these expenditures.

New relevance for Budget Committees. Now, with Democrats assuming control of Congress and moving to restore “pay-as-you-go” rules, the Budget Committees will take on new relevance as the first panels to wade into a broad ranging “guns versus butter” debate. For the first time since 2002, when Republicans let these rules expire, Congress (assuming the Senate approves similar strictures) will be required to pay for any proposal to cut taxes or increase spending by reducing other expenditures an equivalent amount. But even before Democrats give any thought to health-related proposals, their allegiance to their new rules will be tested. One of the first tests will be approving a substantial increase in the hourly minimum wage, a policy the Bush administration is prepared to accept if it is coupled with tax relief for small businesses. Emerging from a private meeting of Senate Democrats on January 5, Majority Leader Harry M. Reid of Nevada said: “If it takes adding small-business tax cuts to have a minimum wage increase, then we’ll do that.”

Another test will soon follow when Democrats seek to reduce the impact of the Alternative Minimum Tax (AMT) on middle-class taxpayers, a policy change that would cost billions. The AMT was designed to prevent individuals in upper-income brackets from avoiding paying any taxes, but it was not indexed for inflation. Without a change in policy, more than 30 million taxpayers would be subject to the AMT by 2010.

The House and Senate Budget Committees, charged with developing resolutions that serve as spending guides for other committees that oversee activities across the federal government, will serve as early barometers of the depth of the commitment of Democrats to greater fiscal discipline. The new chairman of the Senate panel, Democrat Kent Conrad of North Dakota, has been an outspoken critic of Republican policies, asserting that the president’s 2007 budget represented “the same reckless fiscal course the Bush administration has followed for the last five years.” But Conrad has also been a strong defender of Medicare and Social Security, two programs that will only grow as the Baby Boom population moves into retirement.

The new chairman of the House Budget Committee, Democrat John Spratt of South Carolina, has been more circumspect in his criticism of the administration’s budget policies. But Spratt and Dave Obey, a Wisconsin Democrat who is the new chairman of the House Appropriations Committee, issued a report in December on the fiscal problems that the Republican-controlled 109th Congress left behind.

Covering kids. One of the first challenges facing the budget committees will be to recommend future spending levels for the State Children’s Health Insurance Program (SCHIP), which expires 30 September 2007 and must be reauthorized. SCHIP offers states federal funds to expand coverage for children in families whose income places them over the eligibility limits of Medicaid but who cannot afford private insurance. Every state took advantage of SCHIP in some form, and the program now covers some 4 million children, while Medicaid covered an additional 22 million in 2005.

When enacted in 1997 as part of the Balanced Budget Act, SCHIP enjoyed broad bipartisan support. That support remains, but some key Democrats believe that federal efforts should be expanded to cover all or most children who live in families of limited means and cannot afford private insurance. And one former ranking official of the Bush administration, Mark B. McClellan, said recently, “Congress should consider expanding the Children’s Health Insurance Program to low-income adults.”

Governors Schwarzenegger, Spitzer voice support for kids. The states of Illinois and Massachusetts have already enacted legislation that expands their public insurance programs to most if not all children and the new governor of New York, Eliot Spitzer, voiced support for a similar initiative on January 3 in his State of the State address. California Governor Arnold Schwarzenegger added more impetus to the new political imperative on behalf of children in an address today (January 8). As part of a comprehensive proposal to achieve universal coverage in California, Schwarzenegger proposed expanding public coverage to all children in families with incomes up to 300 percent of the federal poverty level – about $60,000 for a family of four — including those in families of undocumented immigrants. When Schwarzenegger and his staff were developing his proposal, they consulted with Kaiser Foundation Health Plan CEO George Halvorson. Health Affairs recently published a proposal by Halvorson and his colleagues that called for coverage of all uninsured Californians [2-week free access].

Last fall, America’s Health Insurance Plans also weighed in with its own proposal to expand coverage generally but asserted that children should be the first recipients of this effort. This new emphasis on children could reignite the long-dormant issues surrounding intergenerational equity. Interestingly, however, although governmental spending on the elderly vastly exceeds that for children, most Americans do not believe that this is the case, according to a random sample survey of adults.