Several plans have been floated to delay the impacts of $85 billion in across-the-board spending cuts set to begin on 1 March 2013. Despite the abundance of competing proposals, DC insiders are skeptical that a deal will be done before the cuts take effect.
Senate Democrats plan to consider a measure this week that would avert sequestration for the remainder of the year through higher taxes on the wealthy, new tax revenue from oil extraction from tar sands, and spending reductions in agriculture subsidies and defense. The American Family Economic Protection Act would reduce the deficit through equal parts spending cuts and new revenue. In addition to completely offsetting the cost of sequestration this year, the plan would raise $25 billion to replace additional spending reductions. The White House has voiced its support for the plan.
Republican Senators have expressed opposition to the Democrats’ plan on the grounds that a deal should not include new tax revenue. Instead, the GOP is considering a proposal to grant federal agencies additional flexibility in how to apply the spending cuts. Current law requires that all budget accounts be cut by a fixed percentage—5 percent for non-defense and 8 percent for defense.
House Speaker John Boehner (R-OH) has expressed openness to finding a way to replace sequestration if the Senate can pass a solution. “If they’re willing to pass a bill, we’ll find some way to work with them to address this problem,” Boehner said. Some House Republicans are insisting that such a deal include a plan to balance the budget within 10 years.
Outside of Congress, another deficit reduction plan is being offered by former Senator Alan Simpson and Erskine Bowles, former chief of staff to President Bill Clinton. In 2010, the duo co-chaired a presidential commission to cut the deficit. Their newest proposal would cut the deficit by $2.4 trillion over 10 years. One quarter of this sum would be raised through additional revenue generated by overhauling the tax code. The remainder would come from cuts to health care and mandatory and discretionary programs. The Simpson-Bowles plan would avert sequestration through other spending cuts.
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