Senate Votes Keep $85 Billion U.S. Spending Cuts in Place

The Senate rejected a pair of partisan proposals to replace $85 billion in automatic spending cuts set to begin tomorrow.

Graphic: David Ingold/Bloomberg Visual Data

Graphic: David Ingold/Bloomberg Visual Data

Senators turned back a Democratic proposal, 51-49, and a Republican plan, 38-62, with 60 votes required for each measure.

No additional congressional action is planned before the start of the cuts, to be split between defense and non-defense spending. The across-the-board reductions will total $1.2 trillion over nine years, with $85 billion set to take effect in the remaining seven months of this fiscal year.

President Barack Obama has summoned congressional leaders to the White House tomorrow to discuss the next step. He said in a statement today that Republicans “voted to let the entire burden of deficit reduction fall squarely on the middle class.”

Today’s votes in Washington were symbolic, designed to give Democrats and Republicans political cover when the spending reductions, known as sequestration, take effect.

“The Republicans want the sequester to go forward,” Majority Leader Harry Reid, a Nevada Democrat, said at a news conference before the vote. “They’ve said so, and any efforts at a reasonable approach to this, they won’t let us do it.”

The parties are far apart on how to replace the cuts, which were enacted in 2011 and designed to be so onerous that Congress would find a way to replace them. Democrats say tax increases must be part of any new plan, which Republican leaders oppose. Democrats say they expect the public to place more blame on Republicans, rather than Obama, for reduced federal services.

Market Reaction

Stocks erased gains in the final half hour of trading after the Senate votes. The Standard & Poor’s 500 Index closed down 0.1 percent at 1,514.56 at 4 p.m. in New York after rising as much as 0.6 percent earlier. The Dow Jones Industrial Average fell 20.88, or 0.15 percent, to close at 14,054.49.

Nine Republicans voted against their party’s measure: Kelly Ayotte of New Hampshire, Susan Collins of Maine, Ted Cruz of Texas, Lindsey Graham of South Carolina, Dean Heller of Nevada, Michael Lee of Utah, John McCain of Arizona, Rand Paul of Kentucky and Marco Rubio of Florida.

Democrats Kay Hagan of North Carolina, Mary Landrieu of Louisiana and Mark Pryor of Arkansas voted not to advance the Democratic proposal. All three are running for re-election in 2014 in states Republican presidential candidate Mitt Romney carried last year.

‘It’s Embarrassing’

“It’s embarrassing that after 15 months Senate Democrats still haven’t passed a single sequester replacement bill,” Boehner said in a statement. “Now that today’s political stunt to raise taxes has failed, it’s time for the president and Senate Democrats to do the hard work that is necessary to pass a bill in the Senate so we can begin to resolve this issue.”

Tomorrow’s White House meeting is scheduled for 10 a.m. Washington time, said a congressional aide who sought anonymity. Attending the meeting will be Republicans Boehner and Mitch McConnell, the Senate minority leader, and Democrats Reid and Nancy Pelosi, the House minority leader.

Senate Democrats’ plan would have replaced 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, S.388, was supported by the White House.

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.

Republican Plan

Senate Republicans’ proposal would have retained the $85 billion in cuts while requiring Obama to submit a proposal by March 15 on how to allocate them. The measure would have let Congress vote within a week to reject the president’s plan and keep the original, across-the-board cuts in place. The measure, S.16, was opposed by the Obama administration.

Reid told reporters today that a stopgap government funding measure needed next month will provide the next opportunity for Democrats to press a spending-cut replacement plan that includes tax increases. Current funding for government operations expires on March 27.

“Get it all done at once,” Reid said. “It would be so easy to do.”

Democrats will keep contrasting their fiscal vision with Republicans’, starting with their fiscal 2014 budget proposal, said Senator Charles Schumer of New York, the chamber’s third- ranking Democrat.

“These votes will not be the last word on the issue,” Schumer said. “The debate is just beginning.”

‘Responsible’ Reduction

Senate Democrats’ budget blueprint, scheduled to come to the floor in March, “will replace the sequestration with responsible deficit reduction,” said Budget Committee Chairwoman Patty Murray, a Washington Democrat.

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.

Obama has until 11:59 p.m. tomorrow to issue the order officially putting the cuts into effect.

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 on Feb. 26 that “this additional near-term burden on the recovery is significant.”

“It wouldn’t surprise me if it starts to kick in and some of the effects of it are being felt all over America -- both in industries and the civilian workforce, in the usual maneuvers in training and operations of our military -- to the point where it drives us back together,” McCain said. “That’s my hope.”

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

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