Feb. 28 (Bloomberg) -- Senators plan a pair of symbolic votes that won’t head off $85 billion in U.S. spending cuts scheduled to begin tomorrow.
Neither proposal is expected to advance. Instead, today’s votes in Washington are designed to give Democrats and Republicans political cover when the across-the-board reductions, known as sequestration, 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.
“The Republicans want the sequester to go forward,” Majority Leader Harry Reid, a Nevada Democrat, said at a news conference today. “They’ve said so, and any efforts at a reasonable approach to this, they won’t let us do it.”
House Speaker John Boehner, an Ohio Republican, reiterated his opposition to new tax revenue in any spending-cut plan on the eve of a meeting with the president at the White House.
“How much more money do we want to steal from the American people to fund more government?” Boehner said. “I’m for no more.” He said House Republicans have “laid our cards on the table; we’ve showed we can pass bills to replace the sequester,” referring to bills passed by the House last year that have since expired.
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, supported by the White House, 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’ plan would retain the $85 billion in spending cuts while requiring Obama to submit his own proposal by March 15 on how to allocate 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. The measure, which the Obama administration said it “strongly opposes,” is S.16.
Reid told reporters today that an upcoming stopgap government funding measure 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 upcoming 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.”
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.
Tomorrow, congressional leaders are scheduled to meet with Obama at the White House. Attending will be Republicans Boehner and Mitch McConnell, the Senate minority leader, and Democrats Reid and Nancy Pelosi, the House minority leader.
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.
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. The Standard & Poor’s 500 Index rose 0.2 percent to 1,518.83 at 12:23 p.m. in New York. The Dow Jones Industrial Average added 12.80 points, or 0.1 percent, to 14,088.17.
The Treasury 10-year note yield dropped two basis points, or 0.02 percentage point, to 1.88 percent at 12:32 p.m. New York time, according to Bloomberg Bond Trader prices.
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.”
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