WASHINGTON — Senate Democrats proposed Thursday a 10-month delay in $1.2 trillion of automatic spending cuts for defense and domestic programs set to begin March 1.
The Democrats’ $110 billion plan would replace the across-the-board reductions by making defense spending cuts, ending direct payments to farmers and requiring top earners to pay a minimum 30 percent income-tax rate. That is known as the Buffett rule after billionaire investor Warren Buffett.
“We have a plan, and it’s got real money,” Sen. Barbara Mikulski, a Maryland Democrat who leads the Senate Appropriations Committee, told reporters. “This is real money and real revenue - we’re doing revenue, we are closing loopholes - we’re reducing expenditures.”
The spending-cut deadline marks another fiscal showdown between President Barack Obama and congressional Republicans over whether efforts to reduce the budget deficit should include revenue or be limited to spending cuts. Unless Congress acts, $1.2 trillion in across-the-board spending cuts, known as sequestration, will take effect over nine years, which could hurt economic growth.
White House spokesman Jay Carney said the plan “includes spending cuts that won’t harm middle class families while closing tax loopholes that benefit the wealthiest.” He urged Republicans not to insist on “putting the entire burden of reducing the deficit on the backs of the middle class and seniors.”
House Speaker John Boehner of Ohio and other Republicans oppose replacing the cuts with any new revenue.
“The sequester will be in effect until there are cuts and reforms that put us on a path to balancing the budget over the next 10 years, period,” Boehner told reporters. Still, he said his chamber would be “happy to take a look” at any plan passed by the Senate.
The Buffett rule, which would be phased in, would reduce the deficit by $54 billion, according to a summary of the Democrats’ plan. The proposal would prevent companies from taking advantage of tax deductions for the cost of moving operations out of the U.S.
Another $1 billion would be raised by requiring oil extracted or imported from tar sands to be subject to the 8-cents-per-barrel tax that goes to the Oil Spill Liability Trust Fund. Crude oil is already subject to the tax. Sen. Mark Begich of Alaska said he and other oil-state Democrats prevented the party from including Obama’s other proposed changes that would raise taxes on oil and gas companies.
The defense cuts, totaling $27.5 billion, would be phased in to coincide with the reduction of troops in Afghanistan, the summary said. The reduction would be about $3 billion in fiscal years 2015 and 2016 and rise to almost $5 billion in fiscal 2021.
The end of direct payments to farmers would save $27.5 billion over 10 years, the summary said.
Finance Committee Chairman Max Baucus of Montana said while he supports the plan he was concerned that eliminating direct payments to farmers might “undermine our ability down the road to do a farm bill.”
Sen. Patty Murray, D-Wash., chairman of the Budget Committee, said the public is “going to be with us as they see we are being responsible” to avert the spending cuts. She dismissed suggestions that Republicans would block the plan, saying they don’t “want to be responsible for the devastating consequences” of letting the cuts take effect.
Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell of Kentucky, said Republicans were looking at several possible alternatives.
He disputed Murray’s contention that the public would back the Senate Democratic proposal. “I would respectfully disagree that the American people would demand more tax hikes,” Stewart told reporters.
Including the Buffett rule would undermine attempts to rewrite the tax code, said Republican Rep. Dave Camp of Michigan, chairman of the House Ways and Means Committee.
“We want to look at this in a comprehensive way,” said Camp. “It’s not about one or two items to get us through the next nine months.”
The Buffett rule provision would raise $54 billion over 10 years, up from a $47 billion estimate last year. The difference is in part because the tax law passed earlier this year set the dividend tax rate lower than it otherwise would have been, meaning the Buffett rule would raise more money in comparison.
Sen. Dick Durbin of Illinois, the chamber’s second-ranking Democrat, said, “The amount of revenue on the table for deficit reduction is way too small” without measures such as the one Senate Democrats announced Thursday.
Democrats’ leverage to push for more revenue, on top of the $600 billion in tax increases they secured in the Jan. 1 agreement, will increase “as people come to understand” the effect of the automatic cuts, Durbin said.
The White House praised the package. Carney, the press secretary, called it a “balanced plan to avoid across the board budget cuts that will hurt kids, seniors, and our men and women in uniform.”
“Republicans in Congress face a simple choice,” he added. “Do they protect investments in education, health care and national defense, or do they continue to prioritize and protect tax loopholes that benefit the very few at the expense of middle and working class Americans?”
The House last year passed legislation to replace automatic cuts to defense spending with reductions in other areas.
“When I hear the president and members of Congress say that the solution must include raising taxes further, I question their seriousness in fixing the overall problem,” Sen. Richard Shelby, an Alabama Republican, said at a hearing held by Mikulski’s committee.
Military leaders are pressuring lawmakers to avoid defense-spending cuts. Deputy Defense Secretary Ashton Carter said at the Senate Appropriations Committee hearing that the effects would be “devastating” for the defense industry.
“All this is the collateral damage of political gridlock,” Carter said.
Democratic Sen. Tom Harkin of Iowa said at the Appropriations hearing, “I take exception to those who say we have a spending problem.”
Instead, Harkin said a “misallocation in our tax code” is placing a burden on the nation’s most vulnerable, such as the elderly, homeless and the disabled. He said he opposes proposals to spare only the Defense Department from cuts.
“If defense is exempted, then the disabled ought to be exempted also,” Harkin said.
As the cuts approach, warnings of disaster are growing increasingly dire.The Senate Appropriations Committee released a barrage of letters from agencies spelling out how the cuts would be meted out: 600,000 low-income women and children dropped from federal nutrition programs; meat and poultry plants forced to close because of furloughed federal inspectors; deep cuts to poor school systems that rely most heavily on federal assistance; delayed permits for oil and gas production; and shorter seasons, reduced operating hours and possible park closings in the national park system.
Job losses could reach 750,000 this year, said Rep. Chris Van Hollen, D-Md.
The FBI would have to furlough employees and eliminate or reduce task forces that would “materially reduce the FBI’s investigative capacity” on mortgage fraud, computer crime, terrorism and financial fraud, Attorney General Eric Holder wrote in a letter to Mikulski.
Homeland Security Secretary Janet Napolitano, in a letter to the Senate Appropriations Committee, said the budget cuts would affect aviation security, roll back border security and hamper disaster response times.
The Transportation Security Administration would reduce its front-line work force, including seven-day furloughs for airport screeners during the fiscal year, adding as much as an hour to lines at security checkpoints, Democrats on the House Appropriations Committee said in a report.
Customs and Border Protection workers would have to take 12 days to 14 days off without pay during the fiscal year, increasing peak wait times for international travelers by three hours or more at busy airports, the lawmakers said. Air traffic controllers and other Federal Aviation Administration workers would take about 11 days of mandatory time off, they said.
While Republicans and Democrats agree the cuts would be destructive, neither side seems ready to negotiate a solution. Sen. Harry Reid of Nevada, the majority leader, reached out to Boehner on Thursday.
Boehner said he told Reid what he has been saying publicly: The House will look at what the Senate can produce.
“This sequester was the president’s idea,” Boehner said. “His party needs to follow through on their plans to replace it.” Information for this article was contributed by James Rowley, Roxana Tiron, Roger Runningen, Richard Rubin, Kathleen Hunter, Alan Levin, Jeff Plungis, Mark Drajem, Jim Snyder, Steve Geimann, Alan Bjerga and Phil Mattingly of Bloomberg News and by Jonathan Weisman of The New York Times.
Front Section, Pages 1 on 02/15/2013