Senate Democrats have unveiled a bill dealing with pending automatic budget cuts which would ward off some of the cuts by focusing spending reductions on farm and defense programs, and also includes tax increases on wealthy Americans and the oil and gas industry.
"It would replace half of the first year of sequestration with responsible spending cuts, and half of it with revenue from those who can afford it most," said Sen. Patty Murray (D-WA), the Chair of the Senate Budget Committee.
The plan has been previously described by Democrats as providing for $55 billion in cuts and $55 billion in new tax revenues.
"This legislation meets Republicans halfway," Murray added in a speech on the Senate floor, alluding to GOP demands to only have budget cuts replace the sequester cuts.
Republicans probably would not agree with that observation, as they again on Tuesday made clear that the GOP wants no part of any tax increases to ward off some of the sequester.
"But one thing Americans simply will not accept is another tax increase to replace spending reductions we already agreed to," said Senate GOP Leader Mitch McConnell.
Senate Republicans were still putting the final touches on their sequester bill on Tuesday. A top GOP aide told me it would be unveiled on Wednesday, but there were rumblings of disagreement among GOP Senators on the details. Votes are expected this week on plans from both parties; neither is expected to be approved.
While we wait for those GOP details, let's go over the text of the Democratic sequester bill, officially titled the "American Family Economic Protection Act of 2013." The bill is S. 388.
First, let's take a quick look at what the bill would do by looking at the Table of Contents:
TITLE I—BUDGET PROVISIONS
Sec. 101. Adjustments to discretionary spending limits.
Sec. 102. Treatment of sequester.
Sec. 103. Budgetary effects.
TITLE II—AGRICULTURAL PROGRAMS
Sec. 201. Extension of agricultural programs.
Sec. 202. Supplemental agricultural disaster assistance programs.
Sec. 203. Noninsured crop assistance program.
Sec. 204. Exemption of agriculture, nutrition, and forestry from BCA sequestration.
Sec. 205. Effective date.
TITLE III—REVENUE PROVISIONS
Sec. 301. Reference.
Sec. 302. Fair share tax on high-income taxpayers.
Sec. 303. Denial of deduction for outsourcing expenses.
Sec. 304. Modifications to the tax on petroleum.
The initial part of this bill details the changes that Democrats would make to the spending limits for the discretionary budget (basically everything outside of Medicare and Social Security).
The first number is the spending cap in the Senate Democratic plan for the discretionary budget, the second in parentheses is the current budget cap in federal law which were set out in the Budget Control Act of 2011:
2013 - $1.043 trillion ($1.047 trillion)
2014 - $1.058 trillion ($1.066 trillion)
2015 - $1.083 trillion ($1.086 trillion)
2016 - $1.104 trillion ($1.107 trillion)
2017 - $1.127 trillion ($1.131 trillion)
2018 - $1.152 trillion ($1.156 trillion)
2019 - $1.178 trillion ($1.182 trillion)
2020 - $1.203 trillion ($1.208 trillion)
2021 - $1.229 trillion ($1.234 trillion)
As you can see, the Democratic plan would spend slightly less than the increases currently built in to the budget, a total of $39 billion less from now until 2021.
Some might call this a "budget savings" in the long term, but certainly it is not a real "budget cut," since it would only reduce the rate of increase already in current law for the federal budget.
The plan would keep the budget this year at the 2012 level of $1.043 trillion. But after 2013, the budget would go up every year.
(If the sequester goes into effect through the end of the fiscal year, the budget baseline is expected to go from $1.047 trillion to $974 billion.)
Under the Democratic plan, the spending cap for the military/national security budget would be $684 billion this year; it would decline to $638 billion by 2021.
Non-defense spending caps would be $359 billion this year; that would rise to $590 billion by 2021.
The biggest chunk of the legislative text of this Democratic plan actually deals with agricultural programs, as it would eliminate direct payments to farmers which are sometimes made even when no crop is produced.
Democrats have advertised that this section would save $27.5 billion over ten years.
The plan also makes a series of other changes governing a variety of farm programs - everything from the National Organic Certification Cost-Share Program to the Rural Microentrepreneur Assistance Program and more.
The bill also adds an exemption for agriculture, nutrition, and forestry programs from any future sequestration to include the Commodity Credit Corporation, Federal Crop Insurance Program and "All other direct spending accounts of the Department of Agriculture."
Of most interest to many will be the tax provisions in this Democratic plan, which were said to raise $55 billion over ten years.
The plan includes a "Fair Share Tax" for those making over $1 million a year, which would go into effect in 2014.
Basically, this is a bid to make those earning over $1 million pay at least a minimum tax rate of 30% on all of their adjusted gross income, minus charitable contributions. It would phase in between $1 million and $2 million in income.
Senate Democrats would also end tax breaks for companies that send jobs overseas, by denying a deduction for outsourcing expenses.
Finally, the bill would make oil from tar sands subject to taxes that go into the oil spill liability trust fund. That would reportedly raise $2 billion.
As the Democrats unveiled their plan to raise more revenue, the Congressional Budget Office told Congress that if lawmakers do nothing on the tax front, a major increase in tax revenue is all but assured for Uncle Sam.
"Federal revenues will increase by roughly 25 percent between 2013 and 2015 under current law," reported Doug Elmendorf, the head of the CBO.
Elmendorf made clear that the increase in tax revenues will not be a fleeting occurrence, saying that "revenues are projected to grow from 15.8 percent of GDP in 2012 to 19.1 percent of GDP in 2015 — compared with an average of 17.9 percent of GDP over the past 40 years."
"Under current law, revenues will remain at roughly 19 percent of GDP from 2015 through 2023," Elmendorf said in testimony for the Senate Budget Committee.
