Senate Sequester Proposals Get Scored

We brought up a couple of weeks ago that there were a number of plans to replace the sequester for either a year or permanently. Now, CBO has given us detailed scores of three proposals: the Senate Democratic plan (the American Family Economic Protection Act, S. 388), a plan (S. 16) by Sen. Pat Toomey (R-PA), and a plan by Sen. Kelly Ayotte (R-NH) (the Sequester Replacement and Spending Reduction Act, S. 18). The Senate Democratic one failed to get the requisite 60 votes in the Senate last week, only receiving 51, while the Toomey proposal was voted down 38-62 last week. The Ayotte plan did not get a vote. However, these plans still provide some insight into each party's current approach to replace sequestration.

We described the Senate Democrats' plan previously. Its main elements, in addition to a one year cancelation of the sequester, include enacting the Buffett Rule ($53 billion), eliminating direct payments for agriculture ($31 billion), and reducing defense spending caps by $28 billion. The net savings from the bill total $2 billion.

Ten-Year Score of Senate Democratic Plan (billions)
  2013-2023 Savings/Costs (-)
Repeal Sequester -$108
Reduce Net Agriculture Spending $28
Enact Buffett Rule (30% Minimum Tax on Millionaires) $53
Enact Other Revenue-Raisers $2
Reduce Defense Spending Caps $27
Total $2

Source: CBO

The Toomey bill, rather than replacing the sequester with different policies, allows the President to allocate the cuts however he wishes. The President would be required to report this allocation by March 15, and the plan would be subject to Congressional disapproval by a majority vote. The CBO determined that the legislation's budgetary impact was unknown, since it would depend on how the cuts were allocated. However, they said that it was more likely than not that the result would be to increase spending relative to current law because the President could end up cutting spending that would not have been spent anyway.

The Ayotte plan that CBO scored has a number of different elements. These include a one-year repeal of the discretionary sequester (the sequester to certain mandatory programs remains in place); an extension of the federal employee pay freeze through 2014; an increase in recapture of exchange subsidies that are overpaid; a requirement that taxpayers claiming the refundable portion of the child tax credit provide a Social Security number; an increase in federal employee retirement contributions; a $20 billion reduction in the 2013 discretionary cap; a food stamp change that restricts qualification for the Standard Utility Allowance (an increase in benefits for energy assistance) to those who specifically receive low-income energy assistance payments (excluding those who simply apply or intend to apply); and a change to the Consumer Financial Protection Bureau which would subject it to the appropriations process and reduce its budget. Overall, the plan reduces ten-year deficits by $105 billion.

Ten-Year Score of Ayotte Plan (billions)
  2013-2023 Savings/Costs (-)
Repeal Discretionary Sequester -$71
Recapture More Exchange Subsidy Overpayments $58
Require SSN for Child Tax Credit $27
Increase Federal Employee Retirement Contributions $35
Reduce Discretionary Caps $37*
Make Food Stamp Allowance Dependent on Receipt of Payments $13
Reduce CFPB's Budget $6
Total $105

Source: CBO
*Involves reductions in discretionary spending related to the pay freeze and $20 billion reduction in the 2013 cap net of reduced federal government contributions to federal employees' retirement. The decrease in retirement contributions is not accompanied by a reduction in the discretionary caps, so the funds instead "fill in" some of the cuts from the other two policies.

As we have pointed out before, there are also many other plans out there in the House and the Senate that would replace the sequester. Lawmakers should get moving on coming to an agreement because there are much smarter and less economically harmful ways to reduce the deficit.