How Is the House Replacing the Sequester?

Update: CBO has posted scores for the Energy and Commerce and Oversight bills. They would save $113 billion and $83.3 billion, respectively, over ten years.

The sequester -- the automatic across-the-board cuts that will hit equal parts of defense and non-defense spending -- is only eight months away, and some of the hand-wringing over its happening is now starting to turn into high-level action. The House Budget Committee held a hearing yesterday on "Replacing the Sequester," featuring remarks from Daniel Werfel of OMB and Susan Poling of GAO. Poling's testimony focused on technical issues around the sequester: which programs it would hit, how much it would hit, and the fact that agencies could not withhold funds in anticipation of the cuts in mid-FY 2013. Werfel's testimony focused on the President's plan to replace the sequester -- the President's budget.

For its part, the House is actively working to replace the sequester, but for only one year (more on that here). The FY 2013 House budget resolution included reconciliation instructions to six committees to save $260 billion over ten years ($330 billion minus $70 billion of instructions that overlap between multiple committees) in order to offset the $78 billion cost of delaying the sequester for one year.  Here is a summary of where that effort is right now.

  • Agriculture Committee: We discussed the Agriculture Committee's $34 billion of savings in a blog on Tuesday. The savings in the bill come from food stamps (SNAP) by ending the temporary benefit increase a year earlier and tightening eligibility requirements, among other things. It advanced out of committee last week.
  • Energy and Commerce Committee: The Energy and Commerce reconciliation bill advanced out of committee two days ago, but it has not been scored yet by CBO. The bill achieves savings from the Affordable Care Act by defunding the health insurance exchanges, eliminating the Prevention and Public Health Fund, and defunding the CO-OP program. It also reduces Medicaid spending by repealing state "maintenance of effort" requirements (requiring states to maintain their current eligiblity standards), extending cuts to hospitals that serve a disproportionate amount of low-income people for one year, and reducing Medicaid state gaming. The bill also includes medical malpractice reform, which overlaps with the Judiciary Committee's bill. Energy and Commerce is required to produce $97 billion of savings over ten years, including tort reform.
  • Financial Services Committee: The Financial Services Committee advanced recommendations that would save $30 billion over ten years. It would so by rolling back many Dodd-Frank related provisions, along with a few other cost saving options. The bill would eliminate the resolution authority that allows the FDIC to wind down large financial institutions, cut the Consumer Financial Protection Bureau and make it subject to the appropriations process, and repeal the Office of Financial Research. In addition, the bill would eliminate the Home Affordable Modification Program and reform flood insurance.  
  • Judiciary Committee: The Judiciary Committee advanced their reconcilation bill two days ago, one which enacts malpractice reforms. The bill was scored by CBO as saving $49 billion over ten years. Note that this score indicates that the tort reform in the bill is less aggressive than one in CBO's Budget Options that would save $62 billion.
  • Oversight and Government Reform Committee: The Oversight Committee approved their reconcilation bill yesterday, which must save $79 billion over ten years. The bill would aim to do so by increasing employee retirement contributions, a move that they say would save $83 billion (there has not yet been a CBO score). There are also a few provisions related to regulations that would likely have no budgetary effect.
  • Ways and Means Committee: The Ways and Means Committee approved its reconciliation bill last week, with the three provisions scored separately by CBO. Those three provisions -- increasing repayments for people who receive excess health insurance subsidies, eliminating the Social Services Block Grant, and requiring Social Security numbers for taxpayers receiving the refundable portion of the child tax credit -- would save about $70 billion combined. That well exceeds their ten-year target of $53 billion.
Savings from House Reconciliation Bills (billions)
  2012-2017 2012-2022
Agriculture Committee
Benefit Increase Sunset $4.4 $4.4
Restrict Categorical Eligibility $5.6 $11.5
Change Rules for Standard Utility Allowances $6.7 $14
Other $1.6 $3.8
Subtotal $18.3 $33.7
Energy and Commerce Committee
Target* $28.4 $96.8
Financial Services Committee
Eliminate Resolution Authority $13.4 $22.5
Eliminate HAMP $2.1 $2.3
Reduce CFPB $2.5 $5.5
Eliminate OFR $0.5 $1.0
Subtotal $18.0 $30.4
Judiciary Committee
Tort Reform $13.6 $48.6
Oversight Committee
Target* $30.1 $78.9
Ways and Means Committee
Recapture of Subsidy Overpayments $12.9 $43.9
Require SSN for Refundable CTC $3.7 $7.6
Eliminate SSBG $8.2 $16.7
Subtotal $24.8 $68.2
     
Total, Scored Legislation $76.7 $180.9
Total, Including Targets $135.2 $356.6

*Bill has not been scored by CBO. Numbers represent the committee's target from the budget resolution

Why is the House replacing the sequester?

Why should the sequester be replaced? I am happier with it than any of the House suggestions.

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