CQ TODAY ONLINE NEWS
Feb. 10, 2012 – 10:59 p.m.
Obama Uses Old Ideas for Sequester
By Paul M. Krawzak, CQ Staff
Lawmakers are likely to look closely at President Obama’s fiscal 2013 tax and spending plan, which will be released Monday — not for any initiatives he may propose but rather for ideas on how to avoid $1.2 trillion in automatic spending cuts over the next nine years.
Taken as a whole, the president’s budget will offer a replacement for the spending “sequester” required by last August’s debt limit law (PL 112-25); his alternative would rely on the tax increases and other savings he has advocated previously.
Obama will officially unveil his budget during remarks at Northern Virginia Community College in Annandale, Va., where he is expected to highlight proposals to promote education that he previewed during his State of the Union address last month.
The president also will recommend some other targeted spending increases, including hundreds of billions of dollars for infrastructure projects and job creation.
Senior administration officials said the budget would propose to reduce accumulated deficits by more than $3 trillion over a decade, in addition to almost $1 trillion in savings baked into the debt limit law. If adopted in full, the president’s budget would make the sequester unnecessary, an administration official said.
But lawmakers who are looking for options for avoiding the sequester beyond those proposals included in the budget may be disappointed. An administration official made clear the president intends to leave it up to Congress to work out the details of any alternative that falls short of adopting his recommendations.
Republicans are likely to be even more unhappy because Obama will rely on tax increases to help close the budget gap.
Under Obama’s budget request, the deficit would rise to $1.33 trillion, or about 8.5 percent of gross domestic product, in the current fiscal year from $1.296 trillion in fiscal 2011. The White House says the estimated $901 billion deficit in fiscal 2013 would equal about 5.5 percent of GDP.
As he has in the past, Obama will urge Congress to allow the 2001 and 2003 tax cuts for families that earn more than $250,000 annually to expire on schedule at the end of this year. The administration said that would generate almost $1 trillion in revenue over 10 years.
Half From Taxes
In a presidential election year during which little may be accomplished on Capitol Hill, finding a way to avoid the sequester is likely to be a top legislative concern. Many Republicans and some Democrats view the scheduled automatic cuts — half of which would come from defense programs — as potentially disastrous for the military.
Scott Lilly, a senior fellow at the Center for American Progress and former top Democratic House appropriations aide, calls the sequester the “huge sort of gorilla lurking behind the curtain.” And to Lilly, “Everything pales by comparison.”
Obama has threatened to veto any outright repeal of the sequester, but he has urged Congress to find what he calls a balanced alternative to it.
Obama Uses Old Ideas for Sequester
The president’s budget would achieve $1.5 trillion of its $3 trillion in deficit reduction through increased revenues, guaranteeing the plan will be dismissed in the Republican-dominated House.
Spending cuts in the budget request are based on measures that Obama proposed to the now-defunct Joint Select Committee on Deficit Reduction in September, as the panel was struggling to agree on a plan to cut the deficit by $1.5 trillion over a decade. They include $360 billion in cuts to Medicare, Medicaid and other federal health care spending and $278 billion in cuts to non-health mandatory spending, including agricultural subsidies and federal civilian retirement.
The deficit reduction committee shut down in November when it was unable to reach a consensus, which left a range of federal programs including defense facing $1.2 trillion in automatic spending cuts under the terms of the law.
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Pressure Will Rise
While pressure is sure to build to deal with the threat of the sequester, which would take effect next January, observers are divided over the odds for success before the election.
Steve Bell, senior director of the Economic Policy Project at the Bipartisan Policy Center and a former top Senate Republican budget aide, said he doubts there will be any action to replace the sequester before an expected post-election, lame-duck session.
“I believe they will not be able to agree” before the election, Bell said, adding that repealing the automatic cuts could be a hard sell to some Republican senators.
Lilly sees it as more likely that there will be agreement on an alternative to the fiscal 2013 spending cuts before November.
“I don’t think they can put that off until the lame duck,” Lilly said. “By the time they get back from the election in mid- November they’re going to be within six weeks of this horrific reshaping of federal agencies with massive across-the-board cuts.”
Obama Uses Old Ideas for Sequester
Budget experts already are crunching the numbers to estimate how cuts of $109 billion will be made for fiscal 2013 if Congress does not block the sequester. About $16 billion would be cut from mandatory programs, mostly Medicare, and the rest to come from what amounts to the government’s basic operating budget, discretionary appropriations.
The debt limit law separates discretionary spending into defense, which includes the Pentagon and expenses related to nuclear weapons, and everything outside of defense. About $39 billion in fiscal 2013 would be cut from non-defense appropriations in fiscal 2013 and almost $55 billion would be cut from defense.
Kerry Young and Lauren Smith contributed to this story.