Lawmakers ready budget fallback options amid tax impasse

Defense Spending

With neither side giving in on taxes, some lawmakers are stepping in to address the most immediate fiscal crisis on the calendar: defense cuts.

Senator John McCain, an Arizona Republican, is proposing the “smoothing” approach as an amendment to a defense authorization bill in the Senate. Jeff Sessions, the top Republican on the Senate Budget Committee, is floating the idea to fellow panel members. Senator Angus King of Maine, an independent who caucuses with Democrats, included it in a plan he pitched to committee members.

Leaders of the House and Senate appropriations committees had pressed Murray and Ryan to reach an agreement by Nov. 22 to allow time to write legislation needed to fund the government.

Federal Workers

Ryan’s alternatives would target some federal programs, such as asking federal workers to contribute more to their pension plans. He also is looking at non-tax revenue, such as user fees for aviation security and an annual fee on holders of wireless licenses issued by the Federal Communications Commission, according to the aides.

Such a deal would account for no more than $50 billion to $100 billion, or a year’s worth of cuts under sequestration.

For long-term deficit reduction, lawmakers would need to change the biggest drivers of the debt, Social Security, Medicare and Medicaid, which make up almost half of federal spending. Many lawmakers are hesitant to trim these programs with a record number of Americans living in poverty and amid pushback from interest groups including AARP, the nation’s largest seniors’ lobby with 37 million members.

The chances of a smaller-scale agreement hinge on whether Murray drops her demand that so-called loophole closings be part of a deal and instead accepts increased user fees as a form of revenue, the aides said. Republicans may be willing to offer concessions such as extending unemployment benefits to reach a deal, according to a Republican aide.

‘More Predictability’

The revenue dispute is raising concerns among some lawmakers who are already sketching out other options for dealing with the defense cuts.

“The military wants more predictability, they want time, and they want more flexibility,” Sessions said in an interview. “We can give them all of those without altering the net sequester reductions. You could avoid the cut this year and grow at a lesser pace in the future.”

Sequestration led to $80 billion in automatic reductions starting in March to domestic programs, including Head Start for poor children and scientific and medical research. An added $19 billion cut in Pentagon spending is slated for January.

The panel could trade steeper cuts scheduled for 2014 and 2015 for greater cuts in future years -- sequestration goes through 2021 -- or soften its effects by spreading the total of cuts over a longer time, into 2022 and 2023, the aides said.

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