(AXcess News) – 1. The defense hawks: ‘Shrink the federal workforce instead’
Top Republicans on the House and Senate armed services committees (Rep. Buck McKeon of California and Sen. Jim Inhofe of Oklahoma,respectively) are among those who have joined stalwart defense hawks like Sen. John McCain (R) of Arizona to propose this one-year fix: Slash the federal workforce instead of making all the other cuts (in the process staving off $42.7 billion in cuts to the US military this fiscal year).
The defense hawks would shrink the federal workforce by 10 percent through attrition – or about 210,000 positions. Federal agencies would be allowed to hire one person for every three who leave,netting $85 billion in savings over 10 years. The bill also freezes lawmakers’ pay.
Such a hiring regimen would allow each federal agency to direct new hires to its most vital divisions instead of instituting across-the-board cuts. The lawmakers propose a fix for a single year,in the hope that a broader compromise might be reached within that period.
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“To the president: We bear responsibility as Republicans for allowing this to happen,” Sen. Lindsey Graham (R) of South Carolina said in early February at a press conference introducing the bill. “Lead us to a better solution. If you do not,Mr. President,you will go down in history,in my view,as one of the most irresponsible commanders in chief in the history of the country because what you will have done,Mr. President,is you will have allowed the finest military in the history of the world to deteriorate at a time when we need it the most.”
2. House Republicans: ‘Fewer cuts now,more cuts later’
House lawmakers deserve the badge for “Only People in America To Have Passed a Sequester Replacement.” Led by Speaker John Boehner of Ohio and Budget Committee Chairman Paul Ryan of Wisconsin,the House’s GOP majority twice approved such legislation – but both times in 2012,in the last Congress. Of course,House Republicans could probably come up with the votes to pass their sequester alternative again,but they’ve made their point.
They say that if the Democratic-led Senate doesn’t like their proposal,then it should approve an alternative and send it to the House. What doesn’t the Senate particularly like? Here’s what the 2012 GOP proposal included.
Mr. Ryan’s bill,approved in March 2012,in essence would have instructed the relevant appropriations committees to collectively reduce spending by just $18 billion in fiscal 2013. But the committees would also be required to make programmatic changes to government spending and entitlement programs that would save another $116 billion over the next five years and $261 billion over the coming decade. House Republicans,in other words,would mute the impact of the sequester in 2013,but they would exact deeper cuts in future years to make up for the slow start out of the gate.
This plan gave House committee chairman much latitude to decide what would get cut. However,Republicans highlighted several programs they would target. They would have,for example,reduced the number of people eligible for food assistance and a refundable child tax credit,eliminated parts of President Obama’s health-care reforms and financial regulations,and required federal workers to contribute more to their retirement plans.
3. Senate Democrats: ‘Cut some spending,raise some taxes’
In the Senate,majority Democrats propose offsetting the cost of the sequester by raising a dollar in new revenues for every dollar in spending cuts. It’s a 50-50 split,in which the major pillars are higher taxes for America’s wealthy and less government spending on farm subsidies and national defense.
The plan,fashioned in February by new Budget Committee Chairman Patty Murray (D) of Washington,includes several long-loved Democratic priorities.
It begins with the so-called Buffett rule,named after gajillionaire Warren Buffett,who has famously noted that his secretary’s tax rate is higher than his own because of special tax treatment for people like himself who reap income from investments (through capital gains and dividends). Under the Buffett rule,households making more than $2 million a year (after charitable deductions) would pay at least 30 percent of their income in federal taxes. (The rule begins to phase in at $1 million in annual income.)
Over 10 years,the Buffett rule would raise the lion’s share of the $55 billion in new tax revenue Democrats seek. The rest would come from ending 1) a tax preference for oil produced from oil sands ($2 billion) and 2) a tax deduction for companies that outsource US jobs.
The Democrats’ plan would also cut defense spending by about $27.5 billion over 10 years. Direct payments to farmers,a frequent target of critics in both parties,would shrink by a similar amount during that same period.
Chiefly,the Senate Democrats’ proposal spreads this year’s sequester pain over the next decade – something Republicans generally are loath to do because they fear future Congresses will simply reverse the promised spending restraint. (But wait! Isn’t that exactly what the House voted to do? Yes,indeed. The difference is that the GOP plan offered more cuts in future years than it offset this year.) Moreover,Republicans balk at new tax revenues. They are also determined to save the Pentagon from further cuts,even as Democrats zero in on the defense budget as a target for cuts to come.
The Senate has not yet voted on the Democratic plan to replace the sequester,but is expected to do so by March 1 or soon after.
(Democrats over in the House,meanwhile,have put forward a plan similar to that of their Senate colleagues. But instead of making cuts to the Pentagon,they recommend ending even more tax benefits for the oil and gas industry.)
4. Simpson-Bowles: ‘Think bigger’
“Stupid,stupid,stupid” is how Democrat Erskine Bowles,White House chief of staff under President Clinton,described the sequester in late February. Congress needs to aspire to more – to a broader plan that will put the United States on a more secure fiscal path for decades to come,say Mr. Bowles and former GOP Sen. Alan Simpson,cochairs of Mr. Obama’s commission on reducing US debt and deficits.
Here’s what the daring duo of all things fiscally responsible now say needs to happen.
The sequester would reduce the federal deficit by $1.2 trillion over the next decade,but Congress ought to double that,Mr. Simpson and Mr. Bowles say. To attain that goal,Congress will need to bring in more revenue through tax reform ($600 billion),cut future outlays for Medicare and other health-related programs (another $600 billion),and make deeper spending cuts,they say.
The Simpson-Bowles proposed savings on government health programs are double what Obama endorsed during his State of the Union message on Feb. 12. That’s because their plan is broader,encompassing reform of tort laws,reduced federal payments to health-care providers,and a requirement that wealthier seniors pay more for federal health programs.
The duo does not stop there. They’d cut the deficit another $1.2 trillion by changing the federal inflation measure to a slower-growing formula for indexing government spending and tax brackets (known as chained CPI),which would garner some $300 billion in savings over the next decade. More than $300 billion in savings would come from lower interest payments on the national debt. Further discretionary spending cuts would also be needed,as well as changes to mandatory payments including farm subsidies and federal retirement benefits.
Bowles and Simpson want a plan that is bigger than the sequester and that folds in changes to entitlement programs,for two reasons. First,they believe that cutting the deficit by $2.4 trillion over 10 years would stabilize the debt where it is now – and put it on a downward trajectory in the future. Second,changes to Medicare would ensure that the national debt would continue to shrink beyond 2023 by aligning federal spending obligations with the demographic challenge of an aging population.
5. President Obama: ‘Think less big than Simpson-Bowles’
Obama has made two promises pertaining to the sequester. First,he vowed to veto any offset to the sequester that doesn’t have the same level of deficit reduction. Later,he promised that the sequester would not come into effect.
The president has not put forward a formal bill to replace sequestration,but the White House has argued that his proposal to Speaker Boehner during the “fiscal cliff” talks at the end of 2012 is his blueprint for doing so.
Specifically,Obama would cut spending $200 billion over the next decade,split between the Defense Department and all other functions of government. To that,he would add,over 10 years,$200 billion in targeted cuts,including asking federal employees to contribute more toward their pensions and slicing agricultural subsidies,and another $400 billion in health savings by cutting payments to drug companies and hospitals,for example.
Obama then asks for $580 billion in new tax revenue over the next decade through capping income-tax deductions at 28 percent for the wealthiest Americans and ending other tax preferences. Add in switching to the chained CPI measure favored by Simpson-Bowles (more than $200 billion,split between spending and revenues),and he offers up a total package of $1.8 trillion in deficit reduction over the next decade.