Dems skirmish over Reid’s sequester plan

A large group of liberal Democrats are pushing back against Senate Majority Leader Harry ReidHarry ReidTrump gets chance to remake the courts Democrats local party problem Trump flirts with Dems for Cabinet MORE’s plan to replace the sequester with an even balance of spending cuts and tax revenues. 

They want the package to raise substantially more through taxes and cut less in spending.

Reid, a Democrat from Nevada, has sided with President Obama in supporting a 50-50 split of spending cuts and tax revenues to stop the $85 billion sequester due to take effect March 1.  

ADVERTISEMENT
However, a significant portion of Reid’s caucus argues the split should be 80-20, with tax increases making up the bulk of the package. They contend Reid and Obama are negotiating with themselves by agreeing upfront to a 1-1 ratio of tax increases and spending cuts. 

A group of 15 to 20 progressive Democrats met Monday evening to discuss its concerns over the 1-1 ratio supported by Reid and Obama, according to lawmakers who were in attendance.

Senate Democratic leaders, prodded on by the White House, are attempting to put pressure on the GOP-led House by passing a sequester measure.

Speaker John BoehnerJohn BoehnerLobbying World 'Ready for Michelle' PACs urge 2020 run News Flash: Trump was never going to lock Clinton up MORE (R-Ohio) has repeatedly noted the House twice passed legislation in the last Congress that would have replaced the pending cuts to defense and domestic programs. 

Lawmakers are increasingly anxious about the sequester, which the Congressional Budget Office estimates would lead to the loss of 750,000 jobs this year. 

Reid is unlikely to pivot to an 80-20 breakdown, which would be unpopular among Democrats from Republican-leaning states who are up for reelection next year.

Liberal senators fear the ratio would become tilted more heavily toward spending cuts when and if Reid negotiates with Senate Republican Leader Mitch McConnellMitch McConnellDriverless car industry embraces Trump’s Transportation pick Trump flirts with Dems for Cabinet Lawmakers eye early exit from Washington MORE (Ky.) to move the proposal through the Senate. 

Should a deal move through the upper chamber, subsequent talks with Speaker John BoehnerJohn BoehnerLobbying World 'Ready for Michelle' PACs urge 2020 run News Flash: Trump was never going to lock Clinton up MORE (R-Ohio) would likely push the ratio even further in the direction of spending cuts before it reaches Obama’s desk.

Senate liberals say this outcome would be unfair because, by their calculation, Congress has already enacted $1.7 trillion in spending cuts compared to collecting only $700 billion in new taxes. The members claim the total amount of deficit reduction, including proposals passed in the last Congress, should raise a dollar in taxes for every dollar it cuts in spending.

“In order for the whole thing to tally out at one for one, we need to raise about $1.3 trillion in revenue and little over $300 billion in cuts,” said Sen. Tom HarkinTom HarkinGrassley challenger no stranger to defying odds Clinton ally stands between Sanders and chairmanship dream Do candidates care about our health or just how much it costs? MORE (D-Iowa). 

Harkin said if the sequester package is evenly divided between tax revenues and spending cuts, “it means we’re going to have a lot more cuts than revenue, and that’s not right, not fair.”

But Reid has shown little sign of bending to the pressure. He told reporters this week the package being drafted to replace the sequester “will include equal amounts of revenue and cuts.”

Reid must protect six vulnerable Senate colleagues who are running for reelection in 2014 in states carried by Mitt Romney. 

Centrist incumbents such as Sens. Mark PryorMark PryorCotton pitches anti-Democrat message to SC delegation Ex-Sen. Kay Hagan joins lobby firm Top Democrats are no advocates for DC statehood MORE (D-Ark.) and Max BaucusMax BaucusThe mysterious sealed opioid report fuels speculation Lobbying World Even Steven: How would a 50-50 Senate operate? MORE (D-Mont.) are reluctant to support any package to address sequester that leans disproportionately on closing tax loopholes. 

Baucus, the Senate Finance Committee chairman, has warned against rushing to reform the tax code to find a way to stop the automatic spending cuts without adding to the deficit. 

“When it comes to tax reform, we must avoid the urge for the quick fix,” Baucus said in a statement. “Tax reform is about more than revenues. It is about simplifying people’s lives, encouraging businesses to invest and grow, and boosting innovation and education.”

A senior Democratic aide predicted liberal Democrats will ultimately vote for the sequester package Reid is working on. Baucus, Senate Appropriations Committee Chairwoman Barbara MikulskiBarbara MikulskiOvernight Cybersecurity: Last-ditch effort to stop expanded hacking powers fails Intel Dems push for info on Russia and election be declassified Senate Dems push Obama for info on Russian election interference MORE (D-Md.) and Budget Committee Chairwoman Patty MurrayPatty MurrayOvernight Finance: Trump takes victory lap at Carrier plant | House passes 'too big to fail' revamp | Trump econ team takes shape Senate Dems: Force Cabinet nominees to release tax returns Dems press Trump to keep Obama overtime rule MORE (D-Wash.) are also involved in the discussions. They are expected to brief the Democratic caucus about the legislation on Thursday.

Senators in favor of the 80-20 split maintain there is strong public support for closing an array of special tax breaks. They have zeroed in on offshore tax shelters and tax incentives for companies that move their manufacturing facilities overseas.

“We’re looking at this terrific list of loophole closings, and it wouldn’t hurt anybody,” Sen. Barbara BoxerBarbara BoxerTrucking riders ‘in the mix’ for short-term spending bill Lawmakers praise defense bill's National Guard bonus fix Schumer’s elevation to leader spells trouble for Democrats MORE (D-Calif.) said.  

Boxer said the sequester can be postponed for a year “without any pain” and without spending cuts that would lead to job losses.

She said the focus should be on ending niche tax breaks, not cutting more from government programs. 

“We’ve already had huge spending cuts.  Huge,” she said.

Sen. Sheldon WhitehouseSheldon WhitehouseGOP wants to move fast on Sessions Dem senator backing Sessions for attorney general Dems pledge to fight Sessions nomination MORE (R.I.) and several others in the Democratic caucus have introduced two bills to replace the across-the-board cuts due to take effect at month’s end. 

One measure would stop the sequester for the rest of fiscal 2013 and pay for the $85 billion cost by ending a variety of tax breaks. 

It would enact the “Buffett Rule,” requiring taxpayers earning over $2 million annually to pay a 30 percent effective rate; prohibit high-income professionals from avoiding payroll taxes by claiming corporate status; repeal tax breaks for private jets; end tax subsidies for oil and gas companies; and eliminate tax breaks for manufacturers that produce goods overseas for sale in the U.S.

The second bill would repeal the entire sequester over the next nine years. It would cover the $960 billion cost by enacting the tax reforms of the one-year proposal and others, such as a 28 percent limit on itemized deductions. It would also establish a financial transactions tax, a 0.15 percent fee for the nation’s largest financial firms, and end tax breaks for property and profits held in foreign counties. 

Sens. Carl LevinCarl Levin'Nuclear option' for Supreme Court nominees will damage Senate McCain's Supreme Court strategy leads to nuclear Senate The Fed and a return to banking simplicity MORE (D-Mich.), Bernie SandersBernie SandersOf principle and compromise: A paradox within America’s political discourse Trump adviser: Sanders would have made for tougher race as Clinton's VP Trump adviser: Clinton/Sanders ticket would've been tougher to beat MORE (I-Vt.) and Harkin have co-sponsored the bills. Sen. Jeff MerkleyJeff MerkleyDem senator to Trump: 'You have no mandate' GOP senators wary of nuking filibuster Dem senators charge: Trump not draining the swamp MORE (D-Ore.) has co-sponsored the one-year replacement.