WASHINGTON, D.C. – During the second public meeting of the Budget Conference Committee today, U.S. Senator Angus King (I-ME) offered his colleagues a preliminary proposal to mitigate the impact of sequestration and to promote economic growth.
“As members of the Budget Conference Committee, we not only have a tremendous opportunity, but an obligation, to work together to reach a budget agreement that sets our country on a path to fiscal stability. For far too long, Congress has acted irresponsibly with its budgeting process. It’s time that we actually put together a plan that will instill certainty and confidence into our economy and show the American people we can still govern,” Senator King said.
“The proposal I introduced today will most likely not be the final answer, but with only a month to go before the committee reaches its deadline, my plan is intended to be a contribution to the discussion that will be taking place over the next several weeks. I look forward to working with my colleagues on the committee, hearing their thoughts, and finding a path forward.”
The “Grande” plan – a reference to Starbuck’s middle-sized drink – is intended to be a middle-of-the-road, compromise plan that would alleviate roughly half of the Fiscal Year (FY) 2014-2021 sequester, which amounts to approximately $455 billion, over the course of eight years. The sequester relief would be paid for with $200 billion in revenues generated by closing corporate tax loopholes and $255 billion in savings generated from entitlement reforms. The plan raises more than $525 billion in new revenues over ten years by closing corporate tax loopholes.
More than half of the new revenue raised would be dedicated to federal corporate tax rate reduction, bringing the rate down from 35 percent to roughly 32.5 percent. The remaining portion is dedicated to raising the sequester caps implemented by the Budget Control Act, and putting $50 billion in funds toward infrastructure investment. Sequester “smoothing” – the concept of leveling out the growth rate in spending cap levels by lowering future year increases – will mitigate the sequester in the early years.
Key Elements of the “Grande” Plan
Purpose: An eight year deal, including mandatory cuts, revenues, and “smoothing” to substantially mitigate the effects of the FY14-21 sequester, but produce the same deficit reduction effect.
- Cut the FY2014-FY2021 sequester caps roughly in half through a combination of mandatory cuts ($255 billion) and revenues derived from reducing corporate tax expenditures ($200 billion).
- Generate $325 billion in additional revenue from corporate tax reform to be applied to corporate rate reduction ($275 billion) and an infrastructure fund ($50 billion). The U.S. federal corporate tax rate would be reduced from 35 percent to 32.5 percent.
- Apply the smoothing concept to further alleviate the sequester in the early years, and smooth out projected growth in future years to accommodate sequester relief in the early year.