CBO: Democrat Sequester-Replacement Plan Adds $42B to Deficit This Year

February 28, 2013 - 4:09 PM

reid, obama

Senate Majority Leader Harry Reid (D-Nev.) and President Barack Obama. (AP)

(CNSNews.com) – According to the Congressional Budget Office (CBO), a sequester replacement plan offered by Senate Democrats would add $41.5 billion to the deficit in 2013, even though it would utilize the so-called “balanced approach” favored by President Barack Obama.

Over 10 years, the bill would add another $7.2 billion to the deficit.

Known as the American Family Economic Protection Act, the bill was introduced by Senate Majority Leader Harry Reid (D-Nev.) on Wednesday.

“CBO estimates that S. 388 would increase direct spending by $62.4 billion and revenues by $55.1 billion over the 2013-2023 period. Thus, the cumulative deficit would increase by $7.2 billion from those changes,” the CBO said in its report on Wednesday.

The bill would add $41.5 billion to the deficit in 2013, $15.9 billion in 2014, and $5.2 billion in 2015 before its tax increases are scheduled to begin lowering yearly deficits. However, because it raises spending more than it raises taxes, it would still add a total of $7.2 billion to the deficit, according to the CBO’s calculations.

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(AP Photo)

The spending increases come, unsurprisingly, from replacing the sequestration cuts scheduled to go into effect on Friday. The bill raises taxes by implementing the so-called Buffett Rule – imposing a 30 percent minimum tax on anyone making more than $5 million per year, as well as extending a $0.08-per-barrel tax on oil to cover oil produced from tar sands.

Combined, the CBO estimates that the Buffett Rule tax would raise $53 billion over 10 years and the oil tax would raise just $2 billion. A third provision blocking companies from taking tax deductions if they move production facilities overseas would raise just $200 million.

The bill was formally filed on Tuesday, but has yet to come up for a vote.

President Obama praised the measure as an example of what he termed a “balanced” approach.

“Congress should pass a smaller package of spending cuts and tax reforms that would prevent these harmful cuts [sequestration] -- not to kick the can down the road, but to give them time to work together on a plan that finishes the job of deficit reduction in a sensible way,” Obama said in a speech on February 19.

“I know Democrats in the House and in the Senate have proposed such a plan -- a balanced plan, one that pairs more spending cuts with tax reform that closes special interest loopholes and makes sure that billionaires can’t pay a lower tax rate than their salary -- their secretaries,” said Obama.

The automatic sequester cuts scheduled to start on Friday will trim $44 billion from increased federal spending in 2013, about 1.2 percent of the federal budget, which is $3.6 trillion.