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President and Congress at Stalemate on a Compromise to Avoid Sequester

President and Congress at Stalemate on a Compromise to Avoid Sequester

President Obama
continues to blame congressional Republicans for failing to agree to tax loophole closings and prioritized spending cuts as an alternative to the $85 billion in FY 2013 federal spending cuts mandated under the Budget Control Act (BCA).

On the other side, House Speaker John Boehner (R-OH) shifts the blame to the President and Senate Democrats while explaining that the House has already passed several bills--H.R. 5652, the Sequester Reconciliation Replacement Act, and H.R. 6684, the Spending Reduction Act--that the Senate could take up as a means to prioritize spending cuts.   

 The likely impact that the sequester will have on health programs, beginning this Friday absent legislation, was outlined by Department of Health and Human Services (HHS) Secretary Kathleen Sebelius in response to a request from Senator Barbara Mikulski (DMD) , Chair, Senate Appropriations Committee.  The cuts and reductions in services described by Secretary Sebelius are as follows: $1.6 billion for the National Institutes of Health (NIH); $350 million for the Centers for Disease Control and Prevention (CDC); $120 million for community health centers; 109,000 fewer inpatient admissions; 91,000 fewer substance-abuse treatments; 424,000 fewer HIV tests; 373,000 fewer treatments for seriously ill adults and emotionally disturbed children; and 540,000 fewer doses of vaccines for the flu, hepatitis and measles, etc.  The mandated cuts also include a 2% reduction in Medicare reimbursement rates.  

The Senate Democrats will likely take up their version of sequester replacement legislation that would consist of 50% in revenue increases (a 30% surtax on incomes between $1-2 million; a new tax on tar sands oil; and provisions to repeal a tax deduction for the cost of moving 

corporate equipment overseas and to end several direct agriculture payments) and 50% in alternative spending cuts.  Senate Republicans are likely to impede passage of this bill and Senate Democrats will retaliate by turning back a Republican alternative that would give priority to the cuts under sequestration.  If an alternative to sequestration is not enacted this week, as is likely, then Congress has only until March 22, the start of the Spring recess, to take up another FY 2013 continuing resolution (CR) to provide federal agency spending beyond the March 27th date when the current CR expires.  House Republican appropriators have indicated their intent to include provisions giving the Defense Department authority to prioritize any cuts resulting from the sequester mandate

When Congress returns from the Spring break, the House and Senate are expected to meet the April 15th deadline to pass their FY 2014 budget resolutions.  These plans will set the stage for the next round of negotiations over potential long-term deficit reduction.  The President has suggested he is open to a 10-year deal amounting to $1.5 trillion in deficit reduction while claiming that recent budget and PPACA legislation has already produced $2.4 trillion in cuts over the period.  The chairmen of the President’s Deficit Reduction Commission, former republican Senator Alan Simpson and former President Clinton’s White House Chief of Staff Erskine Bowles, appear to disagree with the $1.5 trillion goal, arguing that a “grand bargain” should contain $2.4 trillion in deficit reduction.  They unveiled a new plan to bridge the Democrat/Republican impasse which would raise $600 billion by closing tax loopholes and lowering rates, $600 billion by slowing the growth of Medicare and Medicaid spending and $1.2 trillion by revising Social Security and pension cost of living adjustments (COLAs) and making other entitlement and discretionary spending reductions (e.g. modernizing civilian health and retirement programs).  The new Simpson/Bowles plan would abandon their earlier goal of cutting the debt-to-GDP ratio to 60% in ten years, but would reduce the ratio to about 70% by the early 2020s.


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