Neither the President nor the House like the cuts to military, domestic, and international appropriations slated to take effect starting next January. Those reductions are part of a ten-year deficit reduction plan enacted in the Budget Control Act. They were meant to be unpalatable, to push Congress towards a more balanced plan including new revenues and health care savings in Medicare and Medicaid. The House Republican majority is unwilling to swallow the appropriations cuts, finding the $55 billion defense reduction particularly distasteful. But their alternative, H.R. 5652, the Sequester Replacement Act of 2012, places the burden of deficit reduction squarely on low-income people and federal workers. The bill prompted a veto threat by the President and has been rejected by the Senate Democratic leadership.
H.R. 5652 combined the recommendations for cuts required of six different committees under the House-passed budget resolution. There were no revenue increases and no tapping of farm subsidies, both strategies to share deficit reduction among people with high-incomes. Instead, millions of low-income people would lose some or all of their SNAP/food stamp benefits, Medicaid coverage, Child Tax Credit, and/or social services. In addition, 350,000 low- and middle-income people would go without health insurance because of restrictions placed on the new health care reform law. Federal workers, already subject to two years of frozen pay, would see their earnings cut further by requiring them to pay a greater share of their retirement benefits. (For a full description of low-income cuts in the bill, see the April 30 Human Needs Report).
The Sequester Replacement Act stops the military and other appropriations cuts scheduled for 2013, but allows the automatic cuts to Medicare to go forward. It does not replace the remaining nine years of cuts required by the Budget Control Act. The bill replaces an estimated $98 billion in FY 2013 cuts, but its reductions would total between $310 billion and $315 billion over ten years, depending on whether the legislation is assumed to be enacted in July or October of this year. (See CBO estimate here). The bill passed the House on party lines, 218 – 199, with 1 voting present and 13 not voting (read more here). No Democrats voted in favor; 16 Republicans voted no.
Democrats attempted to offer a substitute bill, but were rebuffed in the Rules Committee, which adopted a closed rule (no amendments or substitutes allowed on the floor). Their alternative also only replaced one year of cuts (but replaced the Medicare and other mandatory cuts as well as the cuts to appropriations), and proposed revenue increases and an end to certain farm subsidies instead. Revenue increases would come from limiting tax breaks for oil and gas companies ($38 billion over ten years) and applying a minimum tax on annual income over $1 million ($47 billion over ten years). Ending direct payments to farms was estimated to produce a net $26.5 billion in savings over the next decade. (For the CBO analysis of the Democratic substitute, click here).
Senate Majority Leader Harry Reid (D-NV) was firm in announcing that he would allow the across-the-board cuts to take effect rather than adopt the House alternative. That suggests, as many observers have surmised for some time, that replacing the Budget Control Act’s version of deficit reduction will be delayed, most likely until after the election.