The Senate adopted a proposal yesterday that would modestly reduce the U.S. debt through higher taxes for top earners as part of the first budget plan the Democratic-controlled body has passed in four years.

The $3.7 trillion budget proposal, which won’t take effect, highlights differences between Democrats and Republicans over taxes, spending and the size of government. The vote clears the way for the next phase in Washington’s budget battle, which will probably revolve around the need to raise the U.S. debt limit. Federal borrowing authority is scheduled to expire May 19.

 “The Senate passed a budget plan that will create jobs and cut the deficit in a balanced way,” the White House said in a statement. “Like the president’s plan, the Senate budget cuts wasteful spending, makes tough choices to strengthen entitlements, and eliminates special tax breaks and loopholes for the wealthiest Americans to reduce the deficit.”

The Senate plan mostly uses the savings to finance the repeal of $1.2 trillion in automatic spending cuts known as sequestration, leaving little for additional deficit reduction. It differs markedly from the measure adopted by House Republicans earlier last week, which proposes to balance the budget within a decade through steep cuts to a number of politically sensitive programs.

No agreement

The two chambers probably won’t agree on a single plan, with Senate Majority Leader Harry Reid, a Nevada Democrat, saying he sees little reason to bother with a conference committee, in which lawmakers are supposed to work out their differences.

 “Budgets are about far more than numbers on a page -- they are about the values and priorities of the American people,” says Senate Budget Committee Chairman Patty Murray, a Washington Democrat and the plan’s chief sponsor.

Senators voted 50-49 to endorse a fiscal 2014 measure that proposes to raise $1 trillion by clamping down on tax breaks for the wealthy while paring spending on defense, farm subsidies and other programs. The vote capped a session lasting into early morning to consider scores of amendments.

Medicare cuts

The Senate Democrats’ proposal calls for $265 billion in cuts over the next decade to Medicare, the health program for the elderly and disabled, with an additional $10 billion in savings from Medicaid, the joint federal-state health plan for the poor. That’s less than what Obama has endorsed, and a fraction of the almost $800 billion in Medicaid cuts House Republicans want.

Democrats would cut defense spending by $240 billion beginning in 2015, while taking $76 billion from non-health- related mandatory spending. Their plan would offset some of those savings by spending an additional $100 billion in economic stimulus.

The result would be to stabilize the debt at 70.4% of the nation’s gross domestic product in 2023, which would be high by historical standards.

The debt has topped 60% of GDP only a handful of times in the past 60 years — in 2010, 2011, 2012 and, budget forecasters predict, in 2013. It’s projected this year to reach 76%. The plan offered by Ryan would cut the debt over the next decade to 54.8% of GDP.

The Senate budget resolution is S. Con. Res. 8; the House version is H. Con. Res. 25.

To contact the reporter on this story: Brian Faler in Washington at

To contact the editor responsible for this story: Katherine Rizzo at

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