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28 Tax Foundation's Washington News 1 (1976)

handle is hein.tera/wingnews0030 and id is 1 raw text is: January 16, 1976                  Vo.......?  No......
1725 K Street, H.W.
Washington, D. C. 20006
NE'j SESSION TO SEE REPEjnT CF FIGhT OVER TAX, SPENDING ISSUES
The Second Session of the 94th Congress convenes January 19. The Pres-
ident's State of the Union message will be delivered that same day, and h.is
budget for fiscal year 1977 will go to Congress on Wednesday, January 2.
There will be a few significant changes -- for example, the change in the
fiscal year (October 1 - September 30) becomes effective, and the new Congres-
sional budget process will be fully implemented for the first time -- but a
repeat of last year's battle over tax and spending issues is certain to dom-
inate this election year session.
In looking ahead to a renewal of this confrontation it is of interest
to review what Congress did last year, both with respect to the fiscal 1976
budget and the President's tax cut-spending ceiling proposal. President
Ford's original 1976 budget projected outlays totaling $349.4 billion, with
a deficit of $51.9 billion; in May these estimates were revised, to $358.9
billion and $59.9 billion, respectively, and in November the Administration
predicted a further increase in spending, to $366.6 billion, with the def-
icit rising to $67.6 billion.
The Congress, meanwhile, was testing its new budget procedures and set-
ting its own targets and ceilings. In April it adopted the first budget
resolution setting a spending target of $367.0 billion, with a $68.8 bil-
lion deficit. Then, just prior to the December adjournment, it hammered
out and approved a second budget resolution, upping the spending ceiling
to $374.9 billion and setting the deficit appropriate in the light of eco-
nomic conditions and all other relevant factors at $74.1 billion.
On the tax front the story is well known. After much maneuvering the
Congress finally passed a 6-month extension of the 1975 tax reductions,
but without the spending ceiling insisted upon by the President, but was
unable to override his veto. In a last minute compromise Congress passed
a second tax cut extension bill including a declaration of policy agreeing
in principle to a dollar for dollar reduction in spending levels if the
tax cuts were extended beyond June 30, 1976 -- but reserving its right to
approve a higher or lower spending figure if warranted by changing economic
conditions or other unforeseen circumstances.
Many here, understandably, regard this language as meaningless. Now
the confrontation is about to be renewed. The President will present a 1977
budget next week which will be within the $395 billion ceiling he wants.
The real crunch will come in April, May, and June, as the deadline for exten-
sion of the tax cuts nears, and Congress will be considering its initial
budget ceilings. A hint of what is ahead may be found in the recent Joint
Economic Committee staff projection that fiscal 1977 budget outlays are
likely to exceed $420 billion.

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