Republicans Seek ‘Slash and Burn’ Cuts to Slow U.S. Economy, Schumer Says

Charles Schumer, the Senate’s No. 3 Democratic leader, accused Republicans of seeking to slow the U.S. economy for political gain in the debate over cutting budget deficits. He insisted Democrats have the “upper hand” in the negotiations.

Raising the rhetorical stakes while party leaders are far apart over a plan to cut the deficit and increase the U.S. debt limit, Schumer said Republican leaders are seeking deep spending cuts as part of an effort to slow U.S. growth and hurt President Barack Obama’s chances of winning re-election next year.

“It is becoming clear that insisting on a slash-and-burn approach may be part of this plan,” Schumer said today at the Economic Policy Institute in Washington. “It has a double benefit for Republicans: It is ideologically tidy and it undermines the economic recovery, which they think only helps them in 2012.”

The Treasury Department says lawmakers must raise the $14.3 trillion debt limit by Aug. 2 or risk a default on U.S. obligations. The two parties are at odds over Republican demands that only spending cuts, and no tax increases, be included in a companion plan to cut record-high deficits.

Yesterday, Obama insisted higher taxes must be part of any budget pact and warned of “significant and unpredictable” consequences if Congress doesn’t act soon to raise the debt ceiling.

McConnell Response

Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell, a Kentucky Republican, said today the slowing economy has little to do with Republican policies because Democrats control the White House and the Senate.

“The president said yesterday that deficit reduction is important to grow the economy and to create jobs,” Stewart said. “The deficit has gone up dramatically under Democratic control of the Senate and the White House.”

Schumer said Democrats have the advantage in deficit talks, in part because Republican leaders last week quit bipartisan negotiations led by Vice President Joe Biden over the tax issue. The public will likely blame Republicans for any default on obligations to bondholders, he said, and Democrats should have little reason to give in on their main demands.

Those include higher revenue and a requirement that any deficit-reduction deal leave intact benefits for Medicare beneficiaries, he said. He declined to give the size of tax increases Democrats want to see in a final plan.

‘Testing the Limits’

Republicans who “say they are perfectly willing to default on our obligations rather than give a single inch,” Schumer said, are “testing the limits of these talks to see how possible it is to get a deal fully on their terms.”

“I think they are bluffing,” he said. “We have a good opportunity to prevail on our critical priorities.”

Schumer provided details on a “jobs agenda” Senate Democrats plan to advance during the next six months in an effort to jump-start work in the Senate, which has accomplished little this year.

He said Democrats will propose a measure to boost highway construction, clean-energy legislation and a measure to overhaul the visa system for highly skilled immigrant workers. Schumer said his party will pursue bipartisan legislation to press China to raise the value of its currency and help U.S. manufacturers compete against Chinese imports.

To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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