U.S. House Speaker John Boehner has added to his fiscal “Plan B” a measure that would cancel pending defense cuts and shield the Pentagon from further budget shrinkage in 2013. (Alex Wong / Getty Images)
U.S. House Republicans sent President Obama their first plan to avoid the “fiscal cliff,” one that is very different from his opening offer but alike in one way: It also excludes new Defense Department spending cuts.
House Speaker John Boehner, R-Ohio, in a letter to Obama released Dec. 3, criticized a plan Obama lieutenants delivered to lawmakers late last week. The House Republicans’ chief fiscal cliff negotiator also proposed $800 billion in new federal revenue — half the amount proposed in Obama’s opening gambit — and over $1 trillion in new federal cuts.
Those targets were first floated in November 2011 by Democrat Erskine Bowles, Bill Clinton’s chief of staff and the co-chair of Obama’s fiscal commission. The Bowles plan is attractive to House Republicans because it would collect new federal revenues without raising tax rates, which most in the GOP strongly oppose.
“Notably, the new revenue in the Bowles plan would not be achieved through higher tax rates, which we continue to oppose and will not agree to in order to protect small businesses and our economy,” Boehner wrote to Obama.
“Instead, new revenue would be generated through pro-growth tax reform that closes special-interest loopholes and deductions while lowering rates,” Boehner wrote. “On the spending side, the Bowles recommendation would cut more than $900 billion in mandatory spending and another $300 billion in discretionary spending.”
On Nov. 29, senior Obama aides presented the president’s two-stage opening offer to lawmakers.
The White House proposed a number of tax rate hikes for the wealthiest Americans, other new taxes, a number of tax cuts and reforms, unspecified entitlement program reforms, and several other ideas.
Those moves would be made in the first stage of the White House’s envisioned process. Unlike the House GOP plan, the Obama plan mentions the pending sequestration cuts to defense and domestic spending that are slated to kick in Jan. 2 if Washington fails to pass at least a $1.2 trillion deficit-reduction measure or something that delays the cuts.
The Obama administration is proposing a “deferral” — the length of time appears to be unspecified — of those twin $500 billion cuts.
In the proposed second phase, Congress and the White House would tackle major federal tax reform, while implementing entitlement program proposals included in the president’s 2013 budget plan.
The speaker told Obama his proposal “contains very little in the way of common ground,” according to the letter. Boehner criticized the Obama plan’s call for $1.6 trillion in new federal revenue.
“The proposal also includes four times as much tax revenue as spending cuts, in stark contrast to the ‘balanced approach’ on which you campaigned,” Boehner told Obama.
But, notably for the defense sector, neither opening proposal calls for new defense cuts. Some analysts, however, believe eventually — due to its size — the Pentagon budget likely will be dragged onto the fiscal cliff negotiating table and placed under the cost-cutting knife.
Boehner acknowledged the Bowles plan he is endorsing is far from a perfect solution to America’s fiscal woes.
“This is by no means an adequate long-term solution, as resolving our long-term fiscal crisis will require fundamental entitlement reform,” Boehner said. “Indeed, the Bowles plan is exactly the kind of imperfect, but fair middle ground that allows us to avert the fiscal cliff without hurting our economy and destroying jobs. We believe it warrants immediate consideration.”