Republicans shift burden to avoid defense cuts

Congress returned to work Monday with budget battles once again at the fore.

NEW YORK (CNNMoney) -- Surprise! The budget battles are back.

In an effort to avoid cuts to defense spending, House Republicans are pushing a bill that would shift hundreds of billions in spending cuts from the Pentagon to domestic programs, services for the poor and government regulators.

The plan would strip regulators of the ability to wind down failing financial firms, cut spending on Medicaid and end an Obama administration housing program designed to help struggling homeowners.

The cuts total $18 billion in the next fiscal year, and more than $250 billion over the next decade.

The Republican plan is the party's first effort to articulate how it would replace the so-called "sequester," a component of the 2011 Budget Control Act.

The Budget Control Act, which became law in August, raised the debt ceiling, but contained substantial budget cuts, including some that would be negotiated by a so-called super committee.

Should the super committee fail, as it did in November, a set of spending cuts, called the "sequester," would go into effect. The cuts were to fall evenly on defense and discretionary programs. They are scheduled to start in January.

Now, Congress is trying to avoid the already-agreed-upon consequence of failure, and re-negotiate the sequester.

Both parties agree something must be done. Across-the-board cuts at the Pentagon are undesirable, and lawmakers generally agree that an alternative must be developed.

The Pentagon is already digesting $450 billion of reductions over the next decade, and fears the additional $500 billion or more in cuts may be imminent.

"Such a large cut, applied in this indiscriminate manner, would render most of our ship and construction projects unexecutable ... and seriously damage other modernization efforts," Defense Secretary Leon Panetta said late last year in a letter to members of Congress.

The plan being debated in the House would avoid those cuts at the Pentagon, but it will almost surely be defeated in the Senate, where Democrats still outnumber Republicans.

Democrats have yet to offer their own plan on how to best avoid the sequester, but generally favor increasing taxes on the wealthy as a way to achieve deficit reduction.

A report prepared by the House Budget Committee Democratic staff called the Republican plan an "unbalanced approach to deficit reduction" that recommends cuts to "vital services that will affect Americans."

There are questions, too, about some of the budget cuts. Democratic House staffers have called the effort to repeal part of the Dodd-Frank financial reform bill a budget-savings "gimmick."

Republicans say billions can be saved by stripping the FDIC of the authority to shut down a failing financial firm. But Democrats contend that the bill contains a self-funding mechanism that will allow all costs to be recouped from other large financial firms.

The measure does serve as the opening salvo in a budget battle that is likely to linger beyond the general election and into the year-end lame duck congressional session.

That's when lawmakers will try to avoid driving off the so-called "fiscal cliff": the expiration of the Bush-era tax cuts; the expiration of the "doc fix"; and the end of a host of smaller tax breaks and emergency unemployment benefits.

House Budget Committee Chairman Paul Ryan told Democrats last month that there is "no reason why we cannot work together to replace the sequester."

But most political observers see few reasons for optimism, and instead expect the fight over replacing the sequester to become a campaign issue, especially if Ryan is chosen as a running mate for Mitt Romney. The Republican presidential nominee has said he would like to avoid cuts at the Pentagon, and has in fact advocated for a sharp increase in defense spending.