Two weeks ago, in The Budget: What to Expect This Year , I speculated that the congressional budget resolution this year would include instructions that mandate a fully paid-for Alternative Minimum Tax (AMT) patch. I was half right about that. What I didn't anticipate is that the House and Senate would part company on the issue and that it would come to represent the biggest sticking point in Congress's efforts to agree on a budget resolution for Fiscal Year 2009.

What does this all mean and what are the implications for the budget resolution this year?

In the wee hours of last Friday morning, just before Congress left town for a two-week break, the House and Senate adopted $3 trillion budget resolutions for Fiscal Year 2009 by narrow votes of 212-207 and 51-44, respectively. The resolutions are non-binding blueprints for the direction of budget policy over the next five fiscal years. But they matter practically because, if a compromise resolution can be worked out, it will set the overall amount of money the House and Senate appropriations committees will have to allocate to individual federal programs.

While the resolutions are similar in terms of broad policy outlines and priorities, they differ on numerous details and a few major items. The biggest differences are on the overall discretionary spending levels, where the chambers are about $4 billion apart, and on plans to keep the AMT from ensnaring an additional 20 million taxpayers next year. The House resolution adds $25.5 billion in discretionary funding over and above the president's ceiling of $980 billion; the Senate resolution adds $21.8 billion.

Difficult as compromising on the discretionary spending figure might be, the AMT issue may be more intractable: it involves taxes. Because Congress has never seen fit to index the AMT to inflation, an increasing number of taxpayers becomes liable to pay this tax every year. The typical taxpayer who pays the AMT instead of the regular income tax owes about $4,000 more a year. So, for several years now, Congress has "patched" the AMT, holding constant the number of taxpayers who owe it, at an ever-increasing cost in revenue -- $70 billion this year.

The House FY 09 budget resolution uses a "reconciliation instruction" -- a devise designed to make it easier to pass fiscally responsible but unpopular measures by protecting them from filibusters. At the behest of the Blue Dog Democrats in the House, a 45-member caucus of deficit hawks, such a reconciliation instruction is included and requires that the AMT patch this year be "offset" -- that is, paid for (probably by closing tax loopholes somewhere else in the tax code; it would be up to the House Ways and Mean Committee to decide how).

The Senate budget resolution has no such reconciliation instruction -- it simply calls for yet another AMT patch this year. Without offsets, this provision would add $70 billion to the deficit.

This is the main difference that will need to be worked out in conference committee, which will convene soon after Congress returns from its two-week recess on March 31.

Most observers, looking ahead to conference, examine the situation and believe that a compromise on a resolution is achievable. The biggest sticking point in the talks will be whether or not to offset the revenue loss from a one-year patch of the AMT. Senate Democrats say a paid-for patch will never fly in their chamber. Blue Dogs are insistent that reconciliation instructions to offset the patch be retained. When this fight was fought in December, the Senate prevailed. There is little reason to expect a different outcome this time, certainly not at the expense of an ultimate agreement on a budget resolution for FY 09.

There is another possibility: President Bush has threatened to veto any appropriations bills that exceed the amounts in his FY 09 budget proposal to Congress. Rather than comply with Bush's requests, as Congress ultimately did last year, Congress may instead decide to wait to enact appropriations bills until a new administration is in place in the White House in 2009. If that is the budget endgame this year for Congress, then House leaders may decide that sticking to their fiscally responsible "guns" may be more important than finding agreement with the Senate on a final budget resolution, in which case, there would be none.