Senate Plans Symbolic Votes as Spending Cut Set to Begin
Senators plan a pair of symbolic votes that won’t head off $85 billion in U.S. spending cuts scheduled to begin tomorrow.
Neither plan is expected to advance in today’s votes in Washington. Instead, they are designed to give Democrats and Republicans political cover when the across-the-board cuts take effect.
The parties are far apart on how to replace the cuts totaling $1.2 trillion over nine years, $85 billion of which would occur in the remaining seven months of this fiscal year. Democrats say tax increases must be part of a replacement plan, which Republican leaders oppose. Democrats say they expect the public to place more blame on Republicans, rather than President Barack Obama, for reduced federal services.
“I think it’s pretty clear from polling data that the president has the support of more people, but in the long term I think if there’s damage to our national security there could be a real cost to him,” Senator John McCain of Arizona told reporters yesterday.
McCain was the Republican presidential nominee defeated by Obama in 2008.
House Budget Committee Chairman Paul Ryan, interviewed today on CNBC, said he knew of no behind-the-scenes efforts to stop the automatic spending cuts, known as sequestration, from taking effect tomorrow.
‘Going to Happen’
“I do expect the sequester to take effect because the Senate hasn’t acted, the president’s around the country campaigning instead of governing here in Washington,” said Ryan of Wisconsin. House Republicans “don’t think the sequester is the right way” to cut spending “but it is going to happen,” he said.
Senate Democrats propose replacing this year’s part of the spending reduction with a smaller cut to defense programs, a halt in direct payments to farmers, and a tax increase that would impose a minimum 30 percent rate on top earners. The bill is S.388.
The tax provision is known as the Buffett Rule, after one of its leading proponents, billionaire Warren Buffett. It would apply fully to annual income exceeding $5 million.
Senate Republicans offered a bill that would keep the spending cuts, while allowing Obama to submit his own plan by March 15 for allocating them. The measure would let Congress vote within a week to reject the president’s plan and keep the original, across-the-board cuts in place. Some Senate Republicans have said such a plan would cede too much power to Obama. The measure is S.16.
White House
The president summoned congressional leaders to a White House meeting tomorrow. Republicans John Boehner, the House speaker, and Mitch McConnell, the Senate minority leader, and Democrats Harry Reid, the Senate majority leader, and Nancy Pelosi, the House minority leader, will attend.
Boehner told fellow House Republicans during a closed caucus yesterday that he considers the meeting a “listening session” and doesn’t intend to negotiate, said Representative Lynn Westmoreland of Georgia. Leaders didn’t discuss any new strategy to avoid the spending cuts or the possibility of taking up a Senate measure, Westmoreland said.
“I certainly don’t believe that the Senate is going to come up with something,” Westmoreland said in an interview.
‘Constructive Conversation’
White House spokesman Jay Carney said the president anticipates a “constructive conversation” with the congressional leaders, though he said the session probably wouldn’t avert the cuts. Obama remains unwilling to consider a proposal that doesn’t combine cuts with tax increases, Carney said.
Obama has until 11:59 p.m. tomorrow to issue the order officially putting the cuts into effect.
Investors have signaled they aren’t concerned about the effect of the spending reductions on the world’s largest economy. U.S. stocks rose, sending the Dow Jones Industrial Average to a five-year high. The Standard & Poor’s 500 Index rose 1.3 percent to 1,515.99 at 4 p.m. yesterday in New York. The Dow added 175.24 points, or 1.3 percent, to 14,075.37.
Treasury 10-year notes fell for a second day. The benchmark 10-year yield rose two basis points, or 0.02 percentage point, to 1.90 percent at 5 p.m. New York time, according to Bloomberg Bond Trader prices.
McCain, Graham
The next step for Senate Democrats may be to try to gain support from a handful of Republicans -- such as McCain and Lindsey Graham of South Carolina -- for a broader, multiyear proposal that includes new revenue, said Reid spokesman Adam Jentleson.
Administration officials have said the across-the-board cuts will lead to forced days off for government workers and may affect commercial airline flights and functions such as border security.
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 Feb. 26 that “this additional near-term burden on the recovery is significant.”
To contact the reporter on this story: Kathleen Hunter in Washington at khunter9@bloomberg.net
To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net
U.S. President Barack Obama
Jewel Samad/AFP via Getty Images
U.S. President Barack Obama walks in the rain to the Oval Office upon returning to the White House in Washington, D.C..
U.S. President Barack Obama walks in the rain to the Oval Office upon returning to the White House in Washington, D.C.. Photographer: Jewel Samad/AFP via Getty Images
Feb. 28 (Bloomberg) -- U.S. House Speaker John Boehner, a Republican from Ohio, talks about the need for President Barack Obama and the Senate to develop a plan to replace automatic, across-the-board federal spending cuts scheduled to take effect tomorrow. (Source: Bloomberg)
Feb. 28 (Bloomberg) -- House Minority Leader Nancy Pelosi and some women members of the House talk about the automatic federal spending cuts scheduled to take effect tomorrow and the Violence Against Women Act. They speak at a news conference in Washington. (Source: Bloomberg)
Feb. 27 (Bloomberg) -- Megan Hughes reports on the latest developments in the sequester standoff. She speaks on Bloomberg Television's "Bottom Line." (Source: Bloomberg)
Feb. 27 (Bloomberg) -- Roger Altman, chairman of Evercore Partners Inc. and a former U.S. deputy Treasury secretary, talks about the prospects of a bipartisan compromise on automatic U.S. spending cuts set to take effect March 1 and the potential impact of the cuts on the nation’s economy. He speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
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