Democrats want war savings to fund new stimulus package

Democrats on the supercommittee have proposed that the savings from the end of the wars in Iraq and Afghanistan be used to pay for a new stimulus package, according to a summary of the $2.3 trillion plan obtained by The Hill. 

The latest offer from Democrats on the deficit panel, made Monday night to their Republican counterparts, would use some of the war savings to help pay for spending on infrastructure.

The budget savings from ending the wars are estimated to total around $1 trillion over a decade, according to an estimate in July from the Congressional Budget Office.

{mosads}The plan includes $200 billion in defense cuts and slashes $200 billion from other discretionary spending. It raises $650 billion in new federal revenue by setting in motion an overhaul of the tax code, and generates $1 trillion in total revenue.

Rep. Jeb Hensarling (R-Texas), co-chairman of the deficit-reduction panel, told reporters that Democrats and Republicans still have significant differences to bridge. He said Democrats have not put forward a plan that deals with Medicare, Medicaid and other healthcare-related drivers of the deficit that does not include huge tax hikes.

“Unless we fundamentally address that, we will fail in our statutory duty,” Hensarling said.

Supercommittee member Sen. Max Baucus (D-Mont.) said Democrats have put serious Medicare cuts on the table.

“They are very significant,” he said.

The new plan from Democrats cuts a total of $1 trillion from federal spending, $100 billion of which would come from Medicare benefits. Another $250 billion in cuts would be made to payments to Medicare providers.

Democrats proposed using some of the war savings to pay for the so-called “doc fix,” which would repeal scheduled cuts to Medicare payments to doctors.

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An earlier, $3 trillion package offered by supercommittee Democrats included larger cuts to Medicare benefits and a change to the way inflation is calculated for Social Security, which would result in lower benefits. 

The previous offer also raised $1.3 trillion in new revenue through tax increases, which the GOP rejected out of hand.

Hensarling said he thinks his colleagues across the aisle are negotiating in good faith. 

“This is not part of a blame game,” he said. 

“I’m not giving up hope. And I hope my Democratic colleagues aren’t giving up hope until midnight on the 23rd,” Hensarling added. “Now we’ve got a very practical challenge in getting something to the Congressional Budget Office. I acknowledge that. But the stakes are too high for our economy to throw up our hands and give up.”

The Democratic framework come as Republicans have put forward their own plan, which Hensarling said had “considerable concessions” and includes hundreds of billions of dollars of new revenue.

“We believe that pro-growth tax reform is part of both the jobs crisis solution and the debt crisis solution,” Hensarling said.

The GOP is opposed to counting the war savings in the supercommittee package and does not want the panel’s special powers to be used to fast-track President Obama’s stimulus request.

If a majority of the 12-member supercommittee agrees to a deal by the Nov. 23 deadline, it would need only a majority in both chambers to pass, and could not be filibustered in the Senate.

Failure by the panel would result in $1.2 trillion in across-the-board spending cuts divided between discretionary and security spending.

The new Democratic plan would generate $650 billion in revenue from tax reform. To ensure that the revenue is found, they are proposing a “fast-track” procedure for the reform process that would have enforceable triggers if Congress fails to act. 

If tax reform were not completed by January 2013, $325 billion would be raised by capping the use of income tax deductions and by imposing a deficit-reduction surcharge on all income. The trigger also specifies that any entitlement cuts would not take effect until tax reform is completed or the trigger is pulled.

Democrats are combing through healthcare spending to find many of the latest cuts. The offer includes $8 billion in cuts to the prevention and public health trust fund set up by the healthcare reform law, a program the GOP derides as a “slush fund.”

The revised offer includes $5 billion in cuts to payments for durable medical equipment, and $4 billion from payments to hospitals who care for the indigent. The offer counts $13 billion from changes to state taxes on Medicaid providers. 

The savings comes because the federal government would no longer have to reimburse the cost to providers, but could draw fire from states already straining under tight budgets.

Bernie Becker contributed.

—Last updated at 2:11 p.m. 

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