Boehner Opposes Delay in Spending Cuts Without Changes

House Speaker John Boehner said he will oppose any delay of $1.2 trillion in automatic U.S. spending reductions set to begin March 1 unless Congress replaces them with other “cuts and reforms.”

Boehner said it is time for Senate Democrats and President Barack Obama to come up with a plan to replace the spending cuts. He said he is “more than willing” to work with them, as he reiterated his opposition to tax-revenue increases in such a proposal.

“At some point, Washington has to deal with its spending problem,” Boehner, an Ohio Republican, said at a Washington news conference today. “I’ve watched them kick this can down the road for 22 years that I’ve been here. I’ve had enough of it. It’s time to act.”

Obama yesterday urged lawmakers to propose a short-term package of spending cuts and tax-code changes, such as limiting tax breaks, to replace part of the across-the-board reductions.

Senate Majority Leader Harry Reid of Nevada has told fellow Democratic leaders in his chamber that he would like to have a plan to delay the spending cuts ready in the next week, according to a Senate Democratic aide who sought anonymity to discuss private talks.

Another Showdown

The March 1 deadline marks another fiscal showdown between the administration and Republicans, who control the House of Representatives. Boehner and other Republicans have said for weeks that they expect the spending reductions to take effect, and that they won’t accept any tax increase to prevent them.

Congress created the automatic cuts in August 2011 as part of a plan to raise the U.S. debt ceiling. They were set to take effect in January, though lawmakers delayed them for two months in a Jan. 1 measure that let tax rates rise on top incomes.

Dave Cote, chief executive officer of Honeywell International Inc., said today in Boston that he would prefer allowing the automatic cuts to take effect rather than waiting for lawmakers to agree on a plan.

“You could argue that the reduction makes more sense if we cut thoughtfully and spend time on it,” Cote said at a Boston College Chief Executives Club luncheon. “I’m not sure that’s a real option. So the options seem to be let it happen or take it away,” even though it will hurt Honeywell’s defense business, he said.

Defense Officials

Defense industry officials met at the White House today with Obama’s economic advisers to discuss the effects of the automatic cuts, White House press secretary Jay Carney said.

The officials included Wes Bush, Northrop Grumman Corp. chief executive officer; David Hess, president of United Technologies Corp.’s Pratt & Whitney unit; David Melcher, CEO of Exelis Inc.; and Marion Blakey, CEO of the Aerospace Industries Association.

“For some of these companies, the impact would be long-lasting,” Carney said of the spending cuts.

A group of Republican members of the House and Senate Armed Services Committees held a news conference to propose avoiding the spending cuts through September by reducing the federal workforce through attrition and freezing congressional salaries. Similar proposals failed to advance last year.

“The path we’re on right now is that Congress will not act in the next 30 days,” Senator John McCain, an Arizona Republican, said at the news conference. Also at the event were the House panel’s chairman, Buck McKeon of California, and James Inhofe of Oklahoma, top Republican on the Senate panel.

Armed Services

The Senate Armed Services Committee scheduled a Feb. 12 hearing to take testimony from General Martin Dempsey, chairman of the Joint Chiefs of Staff, and other military-service leaders on the potential effects of automatic spending cuts on the Defense Department.

“What they will tell us at that hearing is that we are really in dire straits,” McKeon said. “When the call comes they may not be able to respond to emergencies.”

Obama spoke with Senate Democrats today at their retreat in Annapolis, Maryland, an event closed to the media.

Hawaii Senator Mazie Hirono said Senate Democrats hadn’t reached a consensus on how to postpone the automatic spending cuts.

“For a number of us, we’d like to see a balanced approach,” she told reporters after returning to Washington. “I personally would like to see revenues, I don’t think we can do it by just cutting” spending.

Balanced Budget

The House today passed, 253-167, a measure that would require Obama to submit a plan by April 1 on how and when he would balance the federal budget.

Obama has said he wants to curb tax breaks for top earners and change the treatment of profits in buyout deals, known as carried interest.

Those profits are often treated as capital gains, which are taxed at preferential rates compared with levies on wages. Obama has advocated counting the earnings as ordinary income for tax purposes. That would raise about $16.8 billion, according to the congressional Joint Committee on Taxation.

Republican Representative Tom Cole of Oklahoma said yesterday that a plan including new tax revenue is “just not going to happen,” and that “politically, that wouldn’t pass the House.”

Entitlement Spending

House Republicans have sought changes in long-term entitlement spending, such as partially privatizing Medicare for future recipients or changing the calculation to reduce cost-of-living increases for Social Security recipients.

Democrats oppose Republican proposals to cut Medicare spending that “simply transfer rising health-care costs onto the backs of seniors, said Maryland Representative Chris Van Hollen, the top Democrat on the House Budget Committee.

He said Congress could enact proposed long-term spending cuts to federal health programs that Obama proposed in his budget last year. Those would save $351 billion over 10 years, according to the Congressional Budget Office.

Higher taxes on oil companies that Democrats have considered repeatedly would raise more than $20 billion. Senator Carl Levin, a Michigan Democrat, has suggested corporate tax changes that would limit companies’ ability to shift profits outside the U.S.

An earlier proposal by House Democrats, rejected by Republicans on the Budget Committee, would replace spending cuts by repealing subsidies to the five biggest U.S. oil and gas companies including Exxon-Mobil Corp. and Chevron Corp. It would reduce farm subsidies and impose a 30 percent minimum effective tax rate on adjusted gross incomes above $2 million.

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