Senate Democrats' bill light on deficit cuts

WASHINGTON -- White House-backed legislation in the Senate to replace $85 billion in across-the-board spending cuts would result in very modest deficit savings through the end of the budget year, officials said Wednesday, most if not of all of them through higher taxes on millionaires.

Instead, the bill drafted by Senate Democrats would spread a year's worth of anticipated savings over a decade, a move sponsors say is designed to prevent damage to a shaky economic recovery.

The Democrats' approach to the latest episode of budget brinkmanship comes as the two political parties vie for public support in advance of across-the-board cuts set to kick in Friday.

The replacement measure, which has yet to be distributed publicly, proposes cuts in military spending and elimination of a program of payments to certain farmers, as well as a tax on millionaires as the main elements of an alternative.

It specifies that no defense reductions would take place for 18 months, and officials added that the elimination of the farm program would have virtually no impact on the deficit until a new budget year begins Oct. 1.

The tax on millionaires would raise government revenue through the end of the budget year by an estimated $1 billion -- a figure that pales in comparison to the $85 billion in spending cuts likely to take effect.

The Senate is expected to vote Thursday on rival Democratic and Republican plans to replace the spending cuts, known in Washington-speak as a sequester. Both bills are expected to fail.

In an indication that across-the-board cuts are inevitable, President Barack Obama has set a meeting with congressional leaders for Friday. While the administration has warned of severe cuts in government services as a result of the reductions, few, if any, are likely to be felt for several weeks.

That could give the administration and lawmakers breathing room to negotiate a replacement, although Senate Republican Leader Mitch McConnell said there were limits to what could be negotiated.

Democrats said their proposal was designed with the economy in mind.

It "seeks the same amount of savings in a more responsible way" as the $85 billion in cuts that will otherwise take effect, said Adam Jentleson, a spokesman for Senate Majority Leader Harry Reid.

"The impact on the economy is much better. Sequestration as constituted would hurt economic growth and destroy jobs," he added.

The bill would cut deficits by an estimated $110 billion, half from higher taxes and half from the defense and farm program cuts, during the decade.

That is in keeping with Obama's call for a balanced approach that combines selected spending cuts with closing tax loopholes.

Senate Democrats have been reluctant to spell out the details of their measure, although it is not clear if that results from its relatively small impact on the deficits through the end of the current budget year.

Across the Capitol, though, the party's leaders have talked openly of their desire to spread the cuts in their replacement measure over a longer period.

"It is entirely intentional," said Rep. Chris Van Hollen, D-Md., and the party's senior member on the House Budget Committee. "The whole idea is to achieve the equivalent deficit reduction without hurting jobs and having disruption in the economy. You do that by having targeted cuts and eliminating tax loopholes over a longer period of time," he added.

He said the Democrats' approach is the same as Federal Reserve Chairman Ben Bernanke's recommendation, which is to help the recovery gain strength before beginning to make cuts.

In the Senate, Republicans have yet to disclose their own sequester replacement measure. Most of the rank and file favors an alternative that lets Obama adjust the cuts to minimize any impact on the public, but that approach has its critics among lawmakers who fear giving the White House that much authority.