U.S. Budget: Dems, GOP Seem Invested In Sequestration Stalemate

Published Feb 15, 2013. By John Shaw. In Market News International.

WASHINGTON (MNI) - Even a casual observer of Congress could be forgiven for wondering what might happen if lawmakers spent as much time and energy trying to negotiate a reasonable compromise to replace the coming sequester as they have spent blaming each other for devising the idea in the first place and not acting to alter it.

But the reality appears to be that both Democrats and Republicans are deeply invested in either having the other party completely capitulate to their demands--or allow the sequester to begin on March 1.

It is unclear if actual implementation of the $85 billion in across-the-board spending cuts for this year will alter the political calculus of either party or spur negotiations.

"I think there is very little chance the sequestration will be avoided before March 1," says Bob Bixby, executive director of the Concord Coalition.

"These cuts won't provide the same sudden shock to the system that the tax increases during the fiscal cliff standoff would have caused. They will cause pain later, but not immediately. Both parties seem ready to take this to the brink and see what happens after March 1. Both sides are very comfortable with their talking points. They like them. They might even believe them, Bixby says.

House Speaker John Boehner, in a Thursday briefing, showed no interest in compromising or even negotiating until Senate Democrats pass their sequestration alternative.

"When the Senate passes a plan, we'll be happy to look at it. Until they pass a plan, there's no reason for me to comment on what they could do," he said.

He added: "If they're willing to pass a bill, we'll find some way to work with them to address the problem."

But Boehner also seemed to up the ante when he said that he is in no hurry to strike a deal to replace the sequester.

"The sequester will be in effect until there are cuts and reforms that will put us on the path to balance the budget in the next ten years, period," he said.

Boehner and other House Republican leaders have pledged to introduce a budget this year that achieves balance in a decade through economic growth and spending cuts.

Hours after Boehner made his remarks Thursday, Senate Democrats released their long-simmering plan to replace the sequester this year.

The Senate Democratic plan would replace this year's sequester with a $110 billion package of spending cuts and revenue hikes. The plan generates about $55 billion in new revenues and $55 billion in savings.

The savings come from $27.5 billion in defense programs over the next eight years and $27.5 billion by eliminating certain direct subsidy payments to farmers.

The revenues come from a revised version of the so-called Buffett Rule in which a new 30% tax on adjusted gross income would be phased in on income between $1 million and $2 million and would be fully operational on income over $2 million. Additionally, Senate Democrats would get $2 billion in revenue by allowing oil derived from tar sands to be taxed.

House Democrats have introduced a similar plan but it would generate about $120 billion in savings to replace the sequester.

Senate Minority Leader Mitch McConnell Thursday scorched President Barack Obama and congressional Democrats for failing to offer a credible alternative to replace the scheduled $85 billion in across-the-board spending cuts for 2013.

In remarks on the Senate floor, McConnell said the across-the-board spending cuts which are set to begin March 1 should be replaced with "smarter, targeted spending reductions."

But he said there is little movement toward such a plan. He said Senate Democrats are poised to "swoop in with the gimmick" package that has been drafted under the guidance of "pollsters and PR spinmeisters."

"They have been busy devising the most appealing-sounding tax hikes they can think of," McConnell added.

McConnell derided the coming Senate Democratic plan as a "political stunt," a "total waste of time" and an "escape plan aimed at making Republicans look like the bad guys."

McConnell signaled that Republicans are not going to relent in their demand that any replacement package be comprised completely of spending cuts.

"There won't be any easy off ramps on this one. The days of eleventh hour negotiations are over," McConnell said.

Sequestration mandates $85 billion in across-the-board spending cuts for 2013 and the $1.2 trillion for the full nine-year period. The process was triggered by the failure of failure of Congress's Super Committee in 2011 to agree on a deficit reduction package of $1.2 trillion.

--MNI Washington Bureau; tel: +1 202-371-2121; email: [email protected]