–Hill Panels Continue To Offer Partisan Reaction To Obama Plan
–Lawmakers Open to Sequestration Overhaul, But Differ On Details
–House Budget Committee Chairman Ryan’s Budget Is Next Key Event

By John Shaw

WASHINGTON (MNI) – Congress is emerging Friday from another long
week of hearings on President Obama’s fiscal year 2013 budget, and
lawmakers continue to react to the fiscal plan on predictably partisan
lines.

The most interesting and consequential development this week was
evidence of a bipartisan consensus that the coming across-the board
spending cuts that will begin to be implemented in January of 2013 must
be altered.

As part of last summer’s debt ceiling agreement, Congress mandated
ten year discretionary spending cuts of about $1 trillion, with $487
billion coming from the defense budget.

The subsequent failure of Congress’ Super Committee to agree on
further deficit reduction last fall will trigger an additional $1.2
trillion in spending cuts over nine years, with $500 billion in defense
cuts scheduled.

This week demonstrated that there is an emerging bipartisan
consensus that the $1.2 trillion in across-the-board spending cuts that
are set to begin in January should be restructured, but that the scope
of deficit reduction should not be scaled back.

There remain deep divisions about how to do this.

Rep. Chris Van Hollen, the ranking Democrat on the House Budget
Committee, said this week that Democrats still favor a deficit reduction
package that includes savings from discretionary and entitlement
programs and additional revenues.

Van Hollen said many Democrats could support an overhaul of the
so-called sequestration process if it is replaced by a deficit reduction
package that is “balanced.”

But Republicans in the House and Senate have indicated that the
coming cuts would be deeply damaging to defense and have called for
other savings to be used from either discretionary or entitlement
accounts. They have shown little interest in using new revenues.

In appearances this week before the House and Senate Budget
Committees, Defense Secretary Leon Panetta said he strongly supports
additional deficit cutting efforts, but that it’s wrong to continue to
focus spending cuts in the discretionary portion of the budget.

The nation needs, Panetta said, a “broad, balanced package” to cut
the deficit.

Panetta mocked the sequestration process which mandates the
across-the-board spending cuts, telling the House Budget Committee that
it’s a “crazy formula.”

Panetta said Pentagon is planning to implement the first round of
$487 billion in defense savings over a decade that was mandated by the
August debt ceiling agreement.

But he said implementing an additional $500 billion in defense cuts
that are required by the failure of the Super Committee last fall would
be damaging for the nation’s defense. He said the Pentagon is not making
plans for this level of spending cuts.

Congressional panels will continue to hold hearings on the Obama
budget in the coming weeks, but the next big fiscal event will be House
Budget Committee Chairman Paul Ryan’s unveiling of his FY’13 budget
later this month.

Ryan is likely to revive the main elements of the budget resolution
that he pushed through the House last April.

That plan calls for extending the Bush era tax cuts and making deep
cuts in the projected growth of federal spending. It calls for the
overhaul of Medicare so that future recipients are given fixed subsidies
to buy coverage rather than the current fee for service program. He also
proposed overhauling Medicaid so that it becomes a block grant system in
which states would receive a set amount of funds from the federal
government for the program.

“These programs are growing themselves into bankruptcy,” Ryan said
last year of Medicare and Medicaid.

Ryan’s budget outline also called for major tax reform in which the
top individual and corporate rates would be reduced from 35% to 25%.

The House approved the Ryan budget last April 15 on a party line,
235 to 195 vote. The Ryan budget was rejected by the Senate last spring,
but Democrats did not offer their own plan.

Ryan has signalled that his budget resolution this year will allow
seniors to keep their current Medicare coverage if they wish to, but he
has said fundamental reforms are needed.

“What we are trying to do is advance the idea, to plant the seeds
to reap a bipartisan solution after the elections,” Ryan said several
weeks ago.

Some House Republicans are urging Ryan to offer a budget that
effectively brushes aside last year’s debt ceiling agreement which
limits discretionary spending to $1.047 trillion in FY’13 and set a new
cap for FY’13 discretionary spending at about $950 billion.

Senate Budget Committee Chairman Kent Conrad has said he will offer
a budget resolution this spring, but has not indicated what it’s key
features will be.

Conrad has said in hearings this year that the Simpson-Bowles
panel’s call for $4 trillion in ten year deficit reduction is the
“minimum” that Congress should do.

The Senate has not voted on a budget resolution since 2009.

** Market News International Washington Bureau: (202) 371-2121 **

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