Senate Democratic leaders unveiled a $110 billion sequester-replacement bill at a closed-door caucus meeting Thursday that would replace $85 billion in automatic spending cuts set to hit March 1.
The Senate Democratic package is split evenly between spending cuts and provisions raising new tax revenues, according to a Democratic source.
This version of the Buffett Rule would phase in a 30-percent effective rate for incomes between $1 million and $2 million.
The plan would also end tax breaks that incentivize companies to move jobs overseas, raising less than $1 billion.
The $55 billion in spending cuts are evenly divided between defense and non-defense programs. It would save $27.5 billion by eliminating agricultural subsidies and another $27.5 billion though defense cuts.
Senate Appropriations Committee Chairwoman Barbara Mikulski (D-Md.) said the defense cuts don't kick in until 2015, after the Afghanistan war ends and they are phased in slowly until 2021. The plan would make defense cuts of about $3 billion in fiscal years 2015 and 2016 and slowly rise to $5 billion in 2021.
If passed, the package would stop the sequester through the end of 2013. It would cost $85 billion to halt the automatic cuts through the end of the fiscal year, which ends in October.
The bill would appear to have little chance of reaching President Obama’s desk, however, given opposition from House and Senate Republicans to increasing any taxes to replace the sequester.
The standoff risks significant economic damage. The Congressional Budget Office this week estimated 750,000 jobs would be lost in 2013 alone from allowing the sequester to take effect. On Thursday, Homeland Security Secretary Janet Napolitano testified that the sequester would lead to the equivalent of 5,000 fewer border guards and add an average hour delay for flights at busy airports.
The bill could be a marker for talks on replacing the sequester in the context of the passing a bill to avoid a shutdown after March 27. That must-pass bill could become the vehicle for a compromise on the sequester.
Democrats rallied behind the proposal despite concerns raised by liberals, who said it should have been tilted more to tax hikes.
"The caucus has a deal," Senate Majority Leader Harry Reid (D-Nev.) said after emerging from the meeting.
Liberals voiced concern about the 1-to-1 ratio of spending cuts to tax revenues in the package. By their estimation, Congress has already cut $1.7 trillion in spending and raised taxes by $700 billion since 2010, they note.
“We’ve let it be really lopsided,” said Sen. Tom Udall (D-N.M.). “I’m going to support a more balanced approach than what we have now.”
Senate Budget Committee Chairwoman Patty Murray (D-Wash.), Appropriations Committee Chairwoman Barbara Mikulski (D-Md.) and Finance Committee Chairman Max Baucus (D-Mont.) worked with Senate Majority Leader Harry Reid (D-Nev.) to craft the package.
They presented it to Democratic colleagues at a Thursday lunch.
Walking into the meeting, Sen. Tom Harkin (D-Iowa) said he and other liberals would instead propose raising $157 billion in new revenues through changes to the tax code to pay for the sequester. He said the liberal counteroffer would reform tax breaks for private jets, S corporations and foreign subsidiaries.
Democratic aides predicted there would not be a large number of defections, however.
Harkin said he raised concerns about the 1-to-1 ratio of spending cuts to tax increases but conceded that he would ultimately vote for it. A Democratic aide said Harkin did not present a detailed alternative that would pay for the sequester mostly with revenue-raising measures.
“I think there ought to be more revenue and less cuts because we’ve already taken over 2-to-1 cuts in the past, 2-to-1 cuts over revenue,” said Harkin. “It ought to be more revenue and less cuts.”
Sen. Bernie Sanders (I-Vt.) criticized the package but would not say he would vote against it. "We'll probably end up with 70 percent cuts and 30 percent revenue...we need more revenue," he said. Asked if he is a 'no' vote he said: "No, I'll look at the final package."
Sen. Carl Levin (D-Mich.), who has co-sponsored legislation to raise tax revenues by ending an array of niche tax breaks, said he would vote for Reid’s sequester package even though no parts of his bill were included.
And another Senate liberal, Sen. Barbara Boxer (D-Calif.), indicated her support.
“I would prefer doing all tax loophole closing, but I can do this,” Boxer said.
Murray said there is broad support among Senate Democrats for the package.
“I think our caucus is very supportive of replacing the sequester with a fair and balanced approach,” said Murray. “It will be a balanced approach of 50 percent revenue, 50 percent cuts.”
Murray said some her colleagues strongly prefer a higher ratio of tax revenues but would not vote against the leadership’s plan
“Our caucus is very supportive of this approach,” she said.
"I am supporting his proposal," Sen. Ben Cardin (D-Md.) said. "I think our caucus is very unified...we don't want to see sequestration. It does represent the values of our caucus and it is a proposal that can keep unity in our caucus."
- Zack Colman contributed
Updated at 3:24 p.m.