Three ways that Democrats would avoid the sequester

September 12, 2012

This week, Congressional Republicans have been arguing that President Obama and his Democratic allies have no plan for dealing with the sequester. Yet Democrats actually have three possible strategies to avoid the sequester and tackle the deficit. Each of the plans treat entitlement spending differently. But all of them raise taxes, which is why Democrats have been slow in moving them forward.

Republicans are right that Senate Democrats haven't passed their own alternative to the sequester. In the spring, Sen. Kent Conrad introduced a deficit-reduction alternative modeled on Bowles-Simpson. The plan would have reformed Social Security, phased out the employer deduction for health care, and overhauled the entire tax code, among other major changes, while avoiding the sequester cuts. Republicans like Sen. Jeff Sessions the $2.6 trillion believed the revenue increases were too high, and some Democrats have been wary about its entitlement cuts.* The plan has gone nowhere since then, as Conrad didn't hold his plan up for a vote. "Some Democrats will be disappointed that there's not another plan to rally around, and some Republicans will be disappointed that there's not another plan to attack," Conrad said in April, according to Reuters.

House Democrats have lined up behind a markedly different sequester alternative. Rep. Chris Van Hollen's budget would bring revenue and spending levels to a similar level as the Conrad/Bowles-Simpson plan. But it does so through tax hikes on wealthy Americans and corporations, while declining to make substantive changes to entitlement programs.

Like the House Democratic plan, President Obama's 2013 budget would raise taxes on the richest Americans and eliminate loopholes for corporations and oil companies to raise revenue. But Obama would cut $360 billion from Medicare and Medicaid, "primarily from reduced payments to drug companies and health care providers," explains Kaiser Health News.

Obama's plan would reduce the deficit by a similar amount as Van Hollen's, but "the primary differences are that the House Democratic Budget does not include any specific policies for Medicare or Medicaid (whereas Obama’s budget does) and that it assumes that all war spending is zeroed out after FY 2014," says Steve Bell, an economic policy director at the Bipartisan Policy Center.


(Source: Bipartisan Policy Center)

So there are significant differences in the ways the Democrats are proposing to reform entitlements to reduce the deficit and avoid the automatic cuts. But they're all united by the proposal to make big changes to tax policy to raise revenue — a nonstarter for Republicans. That's part of the reason why none of the Democratic plans have gone anywhere, and why Congress hasn't taken any meaningful steps toward a fiscal cliff compromise.

*Correction: An earlier version of the post said that Republicans blocked Conrad's plan from coming to the floor. Conrad hasn't tried to pass the budget out of committee or for a full vote yet.

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Dylan Matthews | September 12, 2012