White House pushing tax hikes, spending cuts to avoid sequester

Correction: Previous versions of this story gave the wrong title for Senate Minority Leader Mitch McConnell (R-Ky.)

February 22, 2013

The White House is promoting a $1.8 trillion package of spending cuts and tax hikes as the best approach to replace deep reductions in domestic and defense spending set to begin next week — even as Republicans dismiss the proposal as not serious.

With barely more than a week until the deep cuts, known as the sequester, take effect, President Obama and his advisers this week maintained that a deficit reduction plan he put on the table in December amid negotiations over the “fiscal cliff” should still be considered by Congress as a way to avoid another fiscal crisis. Obama spoke with House Speaker John A. Boehner (R-Ohio) and Senate Minority Leader Mitch McConnell (R-Ky.) on Thursday, but no progress was reported.

Obama originally made the offer to Boehner in December negotiations, which ultimately fell apart. The president’s plan — the details of which were known in December but were reiterated on the White House Web site on Thursday — would consist of $200 billion in cuts to domestic and defense programs; $400 billion in reductions in health spending, including Medicare; $200 billion in cuts to other mandatory spending, such as farm subsidies; and $130 billion in savings achieved through a new cost-of-living formula that would slow spending on federal programs, including Social Security. The president’s plan would also raise $680 billion in fresh tax revenue, by limiting tax breaks for the wealthy, closing corporate loopholes and changing the cost-of-living formula that also determines tax brackets.

Combined with lower interest costs as a result of the reduced federal borrowing, the White House said this week that Obama’s proposal would achieve $1.8 trillion in deficit reduction over 10 years. That would come on top of $2.5 trillion in deficit reduction already achieved in deals between Congress and the president.

“His proposal resolves the sequester and reduces our deficit by over $4 trillion dollars in a balanced way — by cutting spending, finding savings in entitlement programs and asking the wealthiest to pay their fair share,” White House Communications Director Jennifer Palmieri wrote in a blog post Thursday. “As a result the deficit would be cut below its historic average and the debt would fall as a share of the economy over the next decade.”

You’ve heard the word “sequester” mentioned by politicians a lot lately. The Washington Post’s Ed O’Keefe explains what the term means, and why it matters. (The Washington Post)

But Republicans dismissed the proposal out of hand, saying that Obama is looking to essentially double up on the new taxes he won in the “fiscal cliff” deal. That last-minute deal, which came after negotiations between Obama and Boehner collapsed, allowed tax rates to rise for people earning more than $400,000 a year, raising more than $600 billion in revenue.

“The president’s final offer was dramatically out of ‘balance,’ with greater than $400 billion more in tax hikes than in spending cuts,” Boehner spokesman Brendan Buck said. “The president was offered a truly balanced approach . . . and he turned it down. His appetite for higher taxes knows no bounds.”

Boehner’s original proposal to the White House was to raise new tax revenue through an overhaul of the tax code — without raising rates. But Republicans say that while they still would still like to overhaul the tax code, any reform should not increase taxes.

The Boehner plan also called for raising $600 billion by reducing spending on federal health programs — $200 billion more than Obama’s proposal — in part by increasing the Medicare eligibility age from 65 to 67. Boehner also embraced new formulas to reduce spending and readjust tax brackets to generate budget savings.

Obama has acknowledged that with only a week until the sequester hits, Congress may not have enough time to negotiate another sweeping deal. He has backed a Democratic plan to delay the sequester through the remainder of the year, by closing a limited set of tax breaks and corporate loopholes and through alternative spending cuts — largely to farm subsidies.

Republicans have grown increasingly willing to allow the sequester happen. Last year House Republicans passed a plan to cancel the defense component of the sequester and instead cut more deeply into domestic programs. Boehner has said any plan should balance the budget in 10 years, a proposal that would require Congress to find savings far in excess of the sequester.

Obama officials say that if his deficit reduction plan were implemented, it would lower the deficit as a percentage of the economy to below 3 percent by 2015 – from 7 percent last year. That would be enough to stabilize federal borrowing for a decade – though it would start to rise fast again in the next decade.

With time running out, the White House is showing a sense of confidence that it will win the battle, while Republicans are saying they have the upper hand.

Obama aides note a Pew Research Center poll released this week, which says that 76 percent of Americans want Congress to replace the sequester with a combination of spending cuts and tax increases. Only 19 percent say tax increases should be off the table.

Republicans, however, say they are confident Obama will be blamed for the sequester — and argue that it should happen without an alternative agreement to cut spending.

“Most Americans are just hearing about this Washington creation for the first time: the sequester. What they might not realize from Mr. Obama’s statements is that it is a product of the president’s own failed leadership,” Boehner wrote in the Wall Street Journal this week.

“The president’s sequester is the wrong way to reduce the deficit, but it is here to stay until Washington Democrats get serious about cutting spending. The government simply cannot keep delaying the inevitable and spending money it doesn’t have.”

Zachary A. Goldfarb is policy editor at The Washington Post.
SECTION: {section=business, subsection=economy}!!!
INITIAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, display_more=true, moderationrequired=false, includefeaturenotification=true, defaultsort=reverseChronological, canvas_allcomments_id=washpost.com/km4ey0dajm, comments_period=14, includevoteofftopic=false, allow_videos=false, childrenitemsperpage=3, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, includesorts=true, includeheader=true, defaulttab=all, includeverifiedcommenters=true, includerecommend=true, maxitemstop=3, includereport=true, source=washpost.com, allow_photos=false, maxitems=15, display_ugc_photos=false, includepause=true, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!!

UGC FROM ARTICLE: {allow_comments=true, allow_photos=false, allow_videos=false, comments_period=14, comments_source=washpost.com, default_sort=, default_tab=, display_comments=true, is_ugc_gallery=false, max_items_to_display=15, max_items_to_display_top=3, moderation_required=false, stream_id=}!!!

FINAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, display_more=true, moderationrequired=false, includefeaturenotification=true, defaultsort=reverseChronological, canvas_allcomments_id=washpost.com/km4ey0dajm, comments_period=14, includevoteofftopic=false, allow_videos=false, childrenitemsperpage=3, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, includesorts=true, includeheader=true, defaulttab=all, includeverifiedcommenters=true, includerecommend=true, maxitemstop=3, includereport=true, source=washpost.com, allow_photos=false, maxitems=15, display_ugc_photos=false, includepause=true, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!
Comments
SECTION: {section=business, subsection=economy}!!!
INITIAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, display_more=true, moderationrequired=false, includefeaturenotification=true, defaultsort=reverseChronological, canvas_allcomments_id=washpost.com/km4ey0dajm, comments_period=14, includevoteofftopic=false, allow_videos=false, childrenitemsperpage=3, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, includesorts=true, includeheader=true, defaulttab=all, includeverifiedcommenters=true, includerecommend=true, maxitemstop=3, includereport=true, source=washpost.com, allow_photos=false, maxitems=15, display_ugc_photos=false, includepause=true, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!!

UGC FROM ARTICLE: {allow_comments=true, allow_photos=false, allow_videos=false, comments_period=14, comments_source=washpost.com, default_sort=, default_tab=, display_comments=true, is_ugc_gallery=false, max_items_to_display=15, max_items_to_display_top=3, moderation_required=false, stream_id=}!!!

FINAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, display_more=true, moderationrequired=false, includefeaturenotification=true, defaultsort=reverseChronological, canvas_allcomments_id=washpost.com/km4ey0dajm, comments_period=14, includevoteofftopic=false, allow_videos=false, childrenitemsperpage=3, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, includesorts=true, includeheader=true, defaulttab=all, includeverifiedcommenters=true, includerecommend=true, maxitemstop=3, includereport=true, source=washpost.com, allow_photos=false, maxitems=15, display_ugc_photos=false, includepause=true, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!
Show Comments
Most Read Business