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Boehner Says Senate Must Get ‘Off Their Ass’ on Spending

Feb. 26 (Bloomberg) -- House Speaker John Boehner, a Republican from Ohio, talks about the need for the U.S. Senate to pass a plan to replace automatic spending cuts that will take effect on March 1. (This report is an excerpt. Source: Bloomberg)

House Speaker John Boehner said the U.S. House won’t act to replace automatic federal spending cuts until the Senate “gets off their ass” and passes a plan.

Boehner also accused President Barack Obama of using the military as a “prop” to campaign for a tax increase in the debate over across-the-board spending reductions that will take effect starting March 1.

“If the Senate acts, I’m sure the House will act quickly,” Boehner told reporters in Washington today. Boehner said Obama isn’t “focused” on finding a solution to averting the reductions.

Meanwhile, investors signaled they aren’t concerned about the effect of the spending reductions on the world’s largest economy.

Boehner dueled remotely with Obama and Senate Democrats over the automatic reductions with the president using the backdrop of a Huntington Ingalls Industries Inc. (HII) shipyard in Newport News, Virginia, to emphasize the potential effects of defense industry cuts in the backyards of Republican lawmakers.

Deadline Approaching

With the deadline approaching, there was no public sign that either side was negotiating to avoid the start of $85 billion in government spending cuts in the final seven months of this fiscal year and by $1.2 trillion over the next nine years.

Half of the reductions will affect defense spending, while the rest will be spread over other federal agencies. Obama and Democrats want to replace part of the cuts with higher tax revenue, while Republicans oppose more taxes.

“These cuts are wrong,” Obama told workers at the shipyard. “They’re not smart. They’re not fair. They’re a self- inflicted wound that doesn’t have to happen.”

Unless there’s a resolution in coming weeks, the nonpartisan Congressional Budget Office estimates that budget reductions will cause a 0.6 percentage-point reduction in economic growth this year. Federal Reserve Chairman Ben S. Bernanke told the Senate Banking Committee today that “this additional near-term burden on the recovery is significant.”

Consumer Optimism

The cuts are set to begin as consumers are showing more optimism about the economy. The Conference Board’s consumer sentiment index climbed to 69.6, exceeding all forecasts in a Bloomberg survey of economists, from a revised 58.4 in January. Other reports today showed home prices in 20 U.S. cities rose in the 12 months to December by the most in more than six years, and purchases of new homes jumped in January to the highest level since July 2008.

Markets Calm

The Standard & Poor’s 500 Index (SPX) is up almost 5 percent this year. The gauge added 0.6 percent at 4 p.m. in New York after sliding 1.8 percent yesterday on concern about renewed turmoil in European markets.

Treasury 10-year notes have been little changed over the last month. The 10-year yield rose one basis point, or 0.01 percentage point, to 1.88 percent as of 3:03 p.m. New York time, according to Bloomberg Bond Trader prices.

Boehner said the House has done its job and now Obama and the Democratic majority in the Senate should act.

“We have moved a bill in the House twice; we should not have to move a third bill before the Senate gets off their ass and begins to do something,” Boehner said.

The House passed its proposal to avert the spending cuts last year, and the measure expired when the last session of Congress ended in early January.

Senate Plan

Senator Majority Leader Harry Reid said voters should understand which chamber is “sitting on its posterior.” He said it’s the House that is on the sidelines while the Senate is working to pass a bill. Senate Democrats propose replacing this year’s portion of the reductions with a smaller defense spending cut, a halt in direct payments to farmers, and a tax increase that would impose a minimum 30 percent rate on top earners.

The tax provision is known as the Buffett Rule after one of its leading proponents, billionaire Warren Buffett. Adam Jentleson, Reid’s spokesman, said after Congressional Budget Office analysis of the tax, Democrats will raise the income threshold to $5 million annually. The original proposal fully phased in the tax at $2 million a year.

Votes probably will be held Feb. 28, Jentleson said.

Senate Republicans may offer an alternative that would give the president flexibility to cut the required amount of spending at federal agencies.

Budget Flexibility

Obama and Reid have dismissed that plan because it includes no revenue and the cuts required are still too steep. Several Republicans, including Senator John McCain of Arizona, have raised objections to giving the president such authority.

Senator Mitch McConnell of Kentucky, the Republican leader in the chamber, said today that his caucus is still discussing several possible alternatives and that he may seek a vote on more than one Republican proposal.

Michigan Representative Sander Levin, the top Democrat on the House Ways and Means Committee, said his party is sticking to its demand for more tax revenue as part of a deal to replace the spending reductions.

Holding Firm

“The president isn’t going to give way,” Levin told reporters and editors at a Bloomberg Government event today. “It’s unsustainable to do it simply through cuts in programs.”

Boehner, at speech this afternoon in Washington, said he backed the idea of revamping and simplifying the tax code, without backing off his insistence that it not raise revenue.

“I hope that we are on the verge of moving a tax-reform bill that will lower rates for all” and “clean out the loopholes and some of the nonsense that’s there” in the internal-revenue code, Boehner said.

Some House Republicans said the fiscal gap is not too wide to negotiate more targeted spending cuts to avoid the across- the-board reductions.

Obama “can sit down with us and negotiate a redistribution of the cuts,” Representative Tom Cole, an Oklahoma Republican, said in an interview. “But the cuts are going to occur” in one form or another, he said.

“There is a range of options where we would negotiate with the president where he would get some of the things he wants, but he is not going to get revenue, it is just not going to happen,” Cole said.

Republican Dissent

Virginia Republican Representative Scott Rigell, whose district includes the Naval Station Norfolk and has the highest concentration of military personnel in the nation, said he disagrees with his party’s leadership on raising revenue.

Rigell, who accompanied Obama for the flight to the shipyard from Washington, said he’d support curtailing some breaks in the tax code to bring more money into the Treasury.

Before Air Force One departed, Rigell said he planned to use the travel time to urge the president to offer a “specific alternative” to the automatic cuts rather than his general call for a package that mixes new revenue with spending cuts.

Potential Effects

Obama and his Cabinet officers have been making appearances to outline the possible effects of the spending cuts, such as longer lines and delays at airports and diminished security at U.S. borders, as part of an effort to peal away Republican support. Rigell said he recognized the risks of getting on Air Force One with the Democratic president.

“I boarded the plane knowing that some would potentially misinterpret” taking the trip, he said.

Colorado Republican Cory Gardner said a deal is possible, “if not this week then Monday or Tuesday of next week.”

“The bottom line is cut spending, OK, is there a better way to do it?” Gardner said in an interview. “As a former legislator in Colorado said, ‘it’s not rocket surgery.’”

To contact the reporters on this story: Roxana Tiron in Washington at rtiron@bloomberg.net; James Rowley in Washington at jarowley@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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