Reid Releases $110 Billion Plan to Replace Sequester With Revenue, Spending Cuts
Senate Majority Leader Harry Reid of Nevada laid out a $110 billion plan on Thursday to replace the sequester with higher taxes on the wealthy, tax revenue from oil derived from tar sands and spending reductions in agriculture subsidies and defense.
Half the replacement savings would come from the tax increases and half from future spending, including $27.5 billion in reductions in defense spending over the next eight years and $27.5 billion from eliminating direct subsidy payments to farmers.
Reid briefed members of the Democratic Caucus at a Thursday lunch on details of the measure he plans to put on the floor the week of Feb. 25.
The majority leader said a Republican alternative package will also be offered.
The blueprint would avert some $85 billion in automatic, across-the-board spending cuts that are scheduled to begin hitting federal agency budgets on March 1. The additional $25 billion in the Democratic plan would replace additional reductions under sequester through December.
Republicans are adamant that no plan to replace the sequester should include new tax revenue. Republicans, who have adamantly opposed tax increases, strongly opposed Reid’s proposal. “The idea of raising taxes is moving in the wrong direction,” said Sen. Michael D. Crapo of Idaho, ranking member on Banking.
But Sen. Patty Murray, D-Wash., chairwoman of the Budget Committee, said that opposition may diminish as the blunt, across-the-board cuts begin to affect services and government programs.
“You’re talking about today,” she said of the GOP opposition. “We are days away from sequestration going into effect. We’re going to be hearing more and more from businesses who are going to be impacted, from people who are going to be furloughed who won’t be able to pay their mortgages, impacting the housing market again. We’re going to be hearing from our Defense Department, which cannot handle this kind of cut.
“We’re putting forward a responsible plan and Republicans are saying, ‘No, let it take effect,’” Murray said.
The White House threw its support behind the plan, and called on congressional Republicans to “back off their insistence of putting the entire burden of reducing the deficit on the backs of the middle class and seniors.”
House Speaker John A. Boehner of Ohio, meanwhile, said Thursday he was open to developing a sequester replacement measure within coming days if Reid can move the measure he is developing in the Senate. “If they’re willing to pass a bill, we’ll find some way to work with them to address this problem,” he said.
But Boehner also insisted that any measure to replace the sequester also would have to include a plan to balance the budget within 10 years.
And Senate Minority Leader Mitch McConnell of Kentucky made clear what he called “an escape plan aimed at making Republicans look like the bad guys” would not draw support from the GOP. “Remember, this is not a solution. Even they know it can’t pass. That’s the idea. It’s a liberal stunt,” McConnell said.
A summary of the plan released by Reid’s office said most of the revenue would come from a new 30 percent tax on adjusted gross income that would be phased in on income between $1 million and $2 million. About $2 billion would come from allowing oil derived from tar sands to be taxed, matching a tax that is assessed on oil from other sources to finance the oil spill liability trust fund.
The millionaire’s surtax proposal has been dubbed “the Buffett rule,” for billionaire investor Warren Buffett, who has called for higher taxes on the wealthy.
More revenue would come from eliminating corporate deductions related to moving jobs overseas.
The spending cuts would come from $27.5 billion in reduced spending on defense through 2021 and $27.5 billion from ending direct agriculture payments.
Appropriations Chairwoman Barbara A. Mikulski of Maryland said defense cuts would come “over a nine-year period starting in 2015, after we’ve brought troops back home.” The cuts would amount to about $3 billion in fiscal years 2015 and 2016, and then would rise slowly to a high of about $5 billion in fiscal 2021.
Reid’s proposal drew strong support from a number of Democrats such as Armed Services Chairman Carl Levin of Michigan and Environment and Public Works Chairwoman Barbara Boxer of California.
“I am confident we would have the majority if not the totality of the Democratic Party,” said Mikulski.
The savings on agriculture echo plans that were included in the farm bill that passed the Senate last June, 65-34. The bill included $24 billion in cuts from elimination of direct payment subsidies, streamlining programs and curbing food assistance waste.
Agriculture Chairman Debbie Stabenow of Michigan vowed to renew her push for the cuts, after they were omitted from the fiscal-cliff deal brokered by Vice President Joseph R. Biden Jr. and McConnell. The measure extended provisions of the 2008 farm law (PL 110-246) through fiscal 2013.
Direct payments have been strongly defended by some Southern senators, however, including Sen. Saxby Chambliss, R-Ga.
Reid faced heavy pressure from his party’s liberal wing to rely more heavily on taxes on the wealthy or on overseas operations of companies. But he stuck with an even split between tax hikes and spending cuts.
Rep. Chris Van Hollen, D-Md., the ranking Democrat on the House Budget Committee, introduced a separate sequester replacement measure in the GOP-controlled House, one he said is “consistent with the Senate proposal” but would bring some $120 billion in savings.
Meredith Shiner contributed to this report.