Senate Democrats are aiming to produce a bill to replace the sequester by Thursday, according to Democratic aides.
The bill would include tax increases and spending cuts, and it would replace the $85 billion in automatic spending cuts known as the sequester.
The sequester, which most members in both parties say will damage national security with its cuts to the Pentagon and other programs, is set to take effect on March 1, leaving Congress little time to act before the Presidents Day recess next week.
If the full caucus approves the draft plan, it could be formally introduced on the floor Thursday, one aide said.
The bill’s introduction could set off a series of procedural motions that would take days to complete.
Democrats are putting the finishing touches on the provisions for the sequestration package, and Senate Majority Leader Harry Reid (D-Nev.) plans to present the details as early as Tuesday to the full caucus, aides said.
Democratic aides stressed Monday that their proposal was not yet complete.
Aides have said elements of the package could reflect a plan offered last week by Rep. Chris Van Hollen (Md.), the top Democrat at the House Budget Committee. That measure would eliminate subsidies to the farm industry, scrap tax preferences used by oil-and-gas companies and implement a new minimum tax rate on people making seven figures annually — the proposal commonly known as the “Buffett Rule.”
The New York Times reported Monday that Senate Democrats were closing in on a $120 billion package that would include elements of the Van Hollen proposal.
Senate Democrats from energy-producing states, including a couple that are up for reelection in 2014, have balked at the oil-and-gas proposal in the past.
Other Democrats, including Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.), a member of leadership, could take issue with ending direct payments to farmers now, because it could make it more difficult to complete a five-year farm bill that includes deficit reduction.
House Republicans in the last Congress voted twice to replace the sequester with a mix of discretionary cuts and cuts to mandatory spending such as farm programs and entitlement benefits. There are no immediate plans to move that bill again in this Congress, sources have said.
The White House at this point is deferring to Senate Democrats to take the lead on a sequester replacement. President Obama last week called on Congress to at least pass a short-term delay as wider budget matters are worked out.
The $85 billion in spending cuts this year is the first part of nine years’ worth of spending cuts agreed to in the 2011 Budget Control Act. Those cuts would shave $1.2 trillion from deficits when interest savings are factored in.
Obama has said he is still holding out for a larger agreement to replace the next eight years of cuts. He has called for hundreds of billions of dollars in new revenues from ending tax breaks, but he said a concession on entitlement benefits that he has offered in the past remains on the table. In talks with Speaker John Boehner (R-Ohio) last year, Obama offered to adopt a less generous way of adjusting benefits in government programs for inflation, called the chained consumer price index.
White House press secretary Jay Carney said Monday that while that offer remains on the table, Obama was now opposed to raising the eligibility age for Medicare, even though the White House put that on the table in past talks.
So far, most Republicans are insisting that the sequester be replaced with spending cuts alone. The bills approved by the House last year included $315 billion in new spending cuts; given the $600 billion in tax hikes agreed to as part of the “fiscal cliff” deal earlier this year, Republicans say the revenue discussion is over.
House Minority Leader Nancy Pelosi (D-Calif.) on Monday sent a letter to Speaker John Boehner (R-Ohio) asking him to cancel the Presidents Day recess until a sequester replacement is agreed to.
Separately on Monday, Sens. Carl Levin (D-Mich.) and Sheldon Whitehouse (D-R.I.) introduced a bill that would close corporate tax breaks in order to raise $189 billion to replace the sequester cuts.
The Cut Unjustified Tax Loopholes Act aims to make it more difficult for multinational companies to avoid paying taxes on profits earned outside the United States. It would change the tax treatment of stock options and derivatives, and it would increase taxes on hedge fund managers by closing the “carried interest” tax break.
Levin said last week he would be pushing to get elements of his bill into any sequester replacement legislation his party comes up with.
This story was posted at 2:56 p.m. and updated at 8:07 p.m.