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House OKs legislation to save $39 billion over 5 years

WASHINGTON—The House of Representatives on Wednesday narrowly approved $39 billion in budget savings over five years in a party-line vote that would rein in some federal spending by increasing costs for many Americans, including college students, the elderly and the working poor.

The legislation, approved by the Senate in December, now goes to President Bush, who issued a statement saying he'll sign it.

The 216-214 outcome was a key victory for Republican leaders, who worked fiercely to prevent too many moderates from defecting on the vote. In the end, 13 Republicans opposed the measure and no Democrat voted for it. A loss would have embarrassed the Republican leadership, coming on the first workday of this House session.

Republicans portrayed the spending cuts as necessary to make up for costs related to Hurricane Katrina and to hold the line on growing federal budget deficits.

"For Americans troubled by a rising tide of red ink here in Washington, D.C., 2006 begins with reason for optimism as this Congress demonstrates the ability to make tough choices in tough times to put our fiscal house in order," said Rep. Mike Pence of Indiana, a leading Republican fiscal hawk.

The spending reductions, however, could be overshadowed by up to $70 billion in tax cuts over five years, which Congress hopes to pass in the next month. That would deepen deficits.

Democrats argued that the spending cuts would hurt the most vulnerable Americans and said the savings paled in comparison to tax reductions that Republicans have enacted over the past year.

"Anybody coming here to the well of the House or going to the voting machine to register his or her vote thinking that this is going to reduce the deficit has another thought coming. The process is a sham," said Rep. John Spratt of South Carolina, the top Democrat on the House Budget Committee.

The largest reduction in spending would be a nearly $12 billion slice in federal student loans. The cut would also increase interest rates for repaying the loans.

The legislation also would reduce Medicaid spending by $4.7 billion over five years while requiring most low-income Medicaid recipients to pay higher co-payments for health services. Current law prohibits health-care providers from denying care even if patients can't pay nominal cost-sharing payments. Under this legislation, providers could deny service for lack of payment.

The measure also would increase penalties for seniors who shift their financial assets so they can qualify for nursing home care under Medicaid. Current law doesn't count the value of a senior's house in determining eligibility for Medicaid, but the bill would make any senior with more than $500,000 in home equity ineligible for nursing home benefits.

The nonpartisan Congressional Budget Office expects that by 2010 the legislation would increase costs of prescription drugs for 13 million Americans, half of them people with incomes below the poverty level.

In one provision that broadens health care coverage, families with incomes up to 300 percent of the federal poverty level who have disabled children would be able to use Medicaid to cover the children's health care costs. The provision would take effect on Jan. 1, 2007, and would be phased in over three years.

The legislation also reduces overall spending on Medicare, the health care program for the elderly, by $6.4 billion over five years.

It also would generate $7.4 billion in new revenue by authorizing the auction of licenses for use of the electromagnetic spectrum for radio, television, mobile phone and other wireless services.

Democrats accused Republicans of bowing to health care lobbyists.

"This is a product of special-interests lobbying, and the stench of special interests hangs over the chamber as we consider it today," said Rep. John Dingell, D-Mich.

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(c) 2006, Knight Ridder/Tribune Information Services.

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