Democrats agree on $2.9 trillion budget

Democrats agree on $2.9 trillion budget
Relies on revenues generated by expiration of many of Bush's tax cuts

Congressional Democrats have sealed an agreement on a $2.9 trillion budget blueprint for the 2008 fiscal year, a House Budget committee spokesman said.

The nonbinding plan, to be officially released later Wednesday, caps weeks of private negotiations and paves the way for action this summer on annual spending bills totaling $1.1 trillion.

The Democratic budget promises a balanced federal ledger in five years, but relies on tax revenues generated by the expiration of many of the tax cuts enacted in President Bush's first term.

Tax cuts aimed at the middle class could be renewed under the compromise, including provisions establishing a 10 percent rate on the first $12,000 of a couple's income, as well as relief for married couples, people with children and those inheriting large estates.

The measure would also restore a "pay-as-you-go" rule that requires tax cuts or spending increases in benefits programs such as Medicare, children's health care or farm subsidies to be financed by spending cuts or tax increases elsewhere so as to not worsen the deficit.

The budget plan is not binding but sets goals for subsequent tax and spending bills. It makes a statement about the priorities of majority Democrats and provides an early test for the party to prove it can govern.

Republicans said Democrats managed to project a balanced budget in 2012 only by assuming tax rates on income, dividends and capital gains revert to pre-Bush levels, costing taxpayers more than $200 billion in alone.