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House vote Thursday increases likelihood of sequestration cuts

Dec. 19, 2012 - 04:01PM   |  
By STEPHEN LOSEY   |   Comments
The chances of the federal government's steep sequestration budget cuts taking effect increased Wednesday, as House Speaker John Boehner rejected President Obama's latest deficit reduction proposal and called on Democrats to pass his own “Plan B” tax bill.
The chances of the federal government's steep sequestration budget cuts taking effect increased Wednesday, as House Speaker John Boehner rejected President Obama's latest deficit reduction proposal and called on Democrats to pass his own “Plan B” tax bill. (AFP)

The chances of the federal government’s steep sequestration budget cuts taking effect increased Wednesday, as House Speaker John Boehner rejected President Obama’s latest deficit reduction proposal and called on Democrats to pass his own “Plan B” tax bill.

“Tomorrow, the House will pass legislation to make permanent tax relief for nearly every American, 99.8 percent of the American people,” Boehner said in brief remarks to reporters. “Then the president will have a decision to make. He can call on the Senate Democrats to pass that bill, or he can be responsible for the largest tax increase in American history.”

Boehner’s bill — which he calls his “Plan B” to partially avoid the so-called fiscal cliff — would hold the current tax rates in place for people making up to $1 million, and allow rates to rise on all income above $1 million. But Boehner’s plan does not address the $109 billion in cuts to defense and domestic spending that would go into effect Jan. 2 — just two weeks away — without a deficit reduction deal.

Jessica Klement, legislative representative for the National Active and Retired Federal Employees Association, said she thinks Boehner’s comments mean sequestration will likely happen, at least for a short time in early 2013.

“I read [Boehner’s comments] as an end to the tax debates as part of the cliff” negotiations, Klement said. “My guess is, it will go into effect.”

President Obama on Monday sent Boehner a proposal that would raise taxes on income above $400,000 — which would be a softening of his campaign position that taxes should go up on income above $250,000 — and agreed to switch Social Security benefits and federal pension adjustments to a lower rate of inflation called the chained Consumer Price Index. Federal employee groups strongly oppose the chained CPI.

But Boehner blasted Obama’s proposal as imbalanced.

“The president’s offer of $1.3 trillion in revenues and $850 billion in spending reductions fails to meet the test that the president promised the people: a balanced approach,” Boehner said.

In a news conference Wednesday, Obama said his proposal would cut spending by more than $1 trillion, when reduced spending on debt interest is factored in. Obama rejected Boehner’s tax cut proposal, as have other Democratic leaders.

“If the argument is that they can’t increase tax rates on folks making $700,000 or $800,000 a year, that’s not a persuasive argument to me, and it’s certainly not a persuasive argument to the American people,” Obama said.

While Obama’s latest proposal including the chained CPI now appears to be dead, Klement said she’s not relieved. She expects chained CPI to be revived next year.

“I would never presume chained CPI is off the table, ever,” Klement said. “It’s gathered too much attention, and would save too much money to ignore this.”

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