Congress Struggles to Avert Shutdown as Parties Disagree on Spending Cuts
Democrats, Republicans in Standoff as Shutdown Looms
Andrew Harrer/Bloomberg
“We’re proposing a short-term solution that will give us time to negotiate,” Harry Reid, Senate Majority Leader said.
“We’re proposing a short-term solution that will give us time to negotiate,” Harry Reid, Senate Majority Leader said. Photographer: Andrew Harrer/Bloomberg
Feb. 18 (Bloomberg) -- Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat, talks with Bloomberg's Al Hunt about House Republicans' budget cut demands. Bloomberg's Julianna Goldman and Lisa Lerer discuss President Barack Obama's budget. Haris Anwar reports on U.S.-Pakistan relations after a U.S. consulate worker was arrested for shooting dead two Pakistanis. Commentators Kate O'Beirne and Margaret Carlson talk about the possibility that New Jersey Governor Chris Christie will be the Republican Party's nominee for president in the 2012 election. (Source: Bloomberg)
Democrats, Republicans in Standoff on Spending
Andrew Harrer/Bloomberg
Current spending authority expires on March 4, and if Congress doesn’t act on a new spending plan by then, the government will shut down.
Current spending authority expires on March 4, and if Congress doesn’t act on a new spending plan by then, the government will shut down. Photographer: Andrew Harrer/Bloomberg
Congressional Republicans and Democrats are preparing dueling plans to avert a U.S. government shutdown early next month as both sides have refused so far to budge in their standoff over spending cuts.
Senate Majority Leader Harry Reid, a Nevada Democrat, said he will bring up a temporary spending measure next week to keep the government operating at current levels into early April and buy time for talks on a longer-term plan.
Democrats oppose the House Republicans’ spending plan, passed Feb. 19, saying its $61 billion in cuts will harm the economy and the nation’s security. The White House has said that President Barack Obama would veto the measure, which would fund the government through Sept. 30.
“We want them to come to the table with us, work out a responsible path forward,” Reid told reporters in a conference call yesterday. “We’re proposing a short-term solution that will give us time to negotiate.”
There isn’t much time. Current spending authority expires March 4; if a new plan is not enacted by then, the government will shut down. Congress is in recess this week.
House Speaker John Boehner, a Ohio Republican, rejected Reid’s proposal for a stopgap measure without additional cuts, insisting -- as he has previously -- that any new funding bill contain more spending reductions. If Reid refuses to act on the Republicans’ measure, the House will act next week on a temporary one “that also cuts spending,” Boehner said yesterday.
‘Willing to Cut?’
“The American people want Congress and President Obama to enact legislation that keeps the government running while cutting spending,” Boehner said in a statement today. “I ask Senator Reid, with all due respect: What are you willing to cut?”
Boehner accused Democrats of working with lobbyists to prevent spending cuts. He said the Republicans’ goal “is to cut spending to create a better environment for job creation -- not to shut down the government,” he said.
The two leaders’ public posturing set the stage for behind- the-scenes talks in which Democrats and Republicans will haggle over how much, and where, to slash federal spending. Reid said he was sending his top aide to start private discussions with a counterpart in Boehner’s office about a longer-term deal.
Avoiding a Shutdown
The White House is “certainly participating” in discussions with congressional leaders aimed at averting a government shutdown, press secretary Jay Carney said today, declining to give details.
“A government shutdown would have harmful effects on our economy. It would set back our economic recovery. It would potentially reduce our growth and reduce our job creation efforts,” Carney told reporters. “We obviously, like the leaders of Congress, want to avoid that, and we believe we can.”
A Goldman Sachs Group Inc. analysis released yesterday said the House-passed plan to cut $61 billion in spending would shave between 1.5 and 2 percentage points off U.S. economic growth during the second and third quarters of this year.
Reducing spending by a smaller amount, such as $25 billion to $50 billion, would cut almost 1 percentage point off the annualized rate of GDP growth in the second quarter, though it would have a “negligible” effect on growth by the end of the year, according to the analysis. A shutdown of the federal government would reduce U.S. spending by about $8 billion per week, according to the research note.
‘Cut-and-Grow Fantasy’
Democrats seized on the analysis, saying it disproved Republican arguments that slashing the deficit would create jobs. “This analysis puts a dagger through the heart of their ‘cut-and-grow’ fantasy,” said Senator Charles Schumer, a New York Democrat.
Both sides have indicated openness to a deal. The chairman of the Senate Budget Committee, Democrat Kent Conrad of North Dakota, said Feb. 19 that the Democratic-controlled chamber would accept about half of the spending cuts Republicans are demanding for this year.
“I think virtually everybody understands we’ve got to cut spending,” Conrad said in an interview on Bloomberg Television’s “Political Capital with Al Hunt.”
Republican Senator Lindsey Graham of South Carolina said he would consider supporting reductions far smaller than the House recently approved as part of a stopgap bill.
‘A Practical Guy’
“We ought to take every opportunity to reduce spending, so I’d like to cut spending even for two weeks,” Graham said Feb. 18. “I’m a practical guy -- but I don’t want to play this game much longer.”
Each side is accusing the other of risking the consequences of a government shutdown.
“It is time to drop the threats and ultimatums, and work together on a path forward,” Reid said in his statement.
House Majority Leader Eric Cantor, a Virginia Republican, made his own push for bipartisan talks.
“A government shutdown is not an acceptable outcome, and I call upon Leader Reid to commit to a good-faith effort to work with us and take that threat off the table,” Cantor said in a statement.
In addition, a half-dozen Republican and Democratic senators are meeting privately in an effort to reach a broader bargain to reduce the deficit, projected to reach $1.6 trillion this year.
Those talks are also being prodded by another deadline: The Treasury Department projects that the U.S. debt will reach its authorized ceiling of $14.3 trillion within a few months, and Republicans have said they want deeper spending cuts as a condition of voting to raise it.
To contact the reporter on this story: Julie Hirschfeld Davis in Washington at or jdavis159@bloomberg.net.
To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net
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