The bill may come to the floor the week of Feb. 25. Senate Dems reach sequester deal

Senate Democrats said Thursday they will move ahead with a roughly $110 billion budget package — evenly divided between new tax revenues and spending cuts — to forestall the across-the-board sequester cuts due to take effect March 1.

“We have a deal,” said Majority Leader Harry Reid after a party luncheon.


The Nevada Democrat hopes to bring the bill to the floor the week of Feb. 25 when senators have returned from the Presidents Day recess.

( Also on POLITICO: Reid's strategy: Her GOP into corral)

That leaves precious little time before the billions in across-the-board cuts take effect and Reid faces an uphill climb finding Republican partners. Nonetheless, his bill is the first sign of legislative movement after weeks of finger-pointing, and Speaker John Boehner (R-Ohio) told reporters that if senators “are willing to pass a bill, we’ll find some way to work with them to address this problem.”

Boehner is betting that Reid will fail and the speaker seems content to rest on a sequester-replacement bill passed by the House in the previous Congress. But that House package is its own political box canyon and puts Republicans right back to litigating many of the economic fairness and Latino issues that dogged them in the 2012 elections.

( Also on POLITICO: House GOP Pentagon crying 'wolf' on sequester)

By comparison, Reid seems determined to learn from 2012 and play those cards to his advantage in what will become increasingly a public relations battle as the cuts approach.

The Democrat’s goal is to buy 10 months in which Congress and the White House could potentially implement a larger budget deal to put to rest the continued threat of the deep cuts threatening the Pentagon and domestic appropriations every year.

With this in mind, Reid leaves the most difficult benefit cuts to future talks with President Barack Obama. Instead, he takes about $55 billion in savings from either outdated farm subsidies or future defense spending after 2015.

In turn, the lion’s share of the tax revenues would come from a new 30 percent minimum tax on those with adjusted gross income of more than $1 million annually.

Dubbed the Buffett rule, the tax was first popularized by the wealthy investor Warren Buffett and embraced by Obama and many Democrats in the 2012 campaign. By taking this path, Reid and Senate Finance Committee Chairman Max Baucus (D-Mont.) leave the door open to work with Republicans on at least corporate tax reform this year. But it’s still a red flag for the GOP, and Minority Leader Mitch McConnell (R-Ky.) condemned the package as a “gimmick” and “political stunt.”

On the left, keeping to the 50-50 formula was not without risk for Reid. And liberals like Sen. Carl Levin (D-Mich.), who preferred more loophole closings and revenue, appeared to have reservations still after the luncheon.

Sen. Sheldon Whitehouse (D-R.I.) admitted he shared these misgivings. For what’s “an opening bid” he said he would have preferred more revenue. “But I am on board,” he told POLITICO. “You can’t let the perfect be the enemy of the good.”

The bill contains:

$27.5 billion in defense savings that begin to take effect in fiscal 2015 after the planned U.S. withdrawal from Afghanistan has been largely completed.

$27.5 billion in net spending reductions from farm programs. About $31 billion would be saved by cutting direct cash payments to producers — a system that is widely criticized at a time of high farm income. And to win support from Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.), the bill reallocates about $3.5 billion of these savings to extend farm programs left hanging by the White House and Senate Republicans in the New Year’s tax deal.

“Billions in direct payment subsidies are paid out even in good times and for crops farmers aren’t even growing,” Stabenow said in defense of the cuts. But House Agriculture Committee Chairman Frank Lucas (R-Okla.) said he was skeptical of making these reforms outside of the context of writing a new five-year farm bill.

“The Senate’s approach of taking away our investment in rural America without addressing the hole it will create is not balanced and not acceptable,” Lucas said.

$54 billion in tax revenues attributed to the new minimum tax on millionaires, an idea first popularized by Buffett. The calculation of adjusted gross income would allow for first subtracting charitable contributions, and the 30 percent rate would reflect the average tax rate on combined income and the taxpayer’s portion of the payroll tax.

$3 billion from two smaller tax provisions. The first would deny tax deductions for outsourcing costs — the costs of relocating a U.S. business unit to a foreign country. The second would include oil from tar sands among the petroleum products that are subject to taxes that support the oil-spill liability trust fund.