March 1 (Bloomberg) -- President Barack Obama met with congressional leaders as no one predicted a breakthrough to avert $85 billion in federal spending cuts set to start before midnight.
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, attended the meeting this morning, which lasted about an hour.
Afterward, Boehner told reporters the House will vote next week on legislation to fund the government for the rest of the fiscal year so Congress won’t have to deal with the risk of a government shutdown while negotiating on the spending cuts.
“The president got his tax hikes on Jan. 1,” Boehner said in asserting that House Republicans won’t support a plan with new tax revenue.
Obama plans to make a statement at 11:35 a.m. Washington time.
Democrats and Republicans are in a standoff over 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. Republicans reject Democrats’ call for higher taxes on top earners to replace part of the spending reductions.
“Middle-class families can’t keep paying the price for dysfunction in Washington,” Obama said in a statement yesterday. The president has until 11:59 p.m. to issue the order officially putting the cuts into effect.
“How much more money do we want to steal from the American people to fund more government?” Boehner said at a news conference in Washington yesterday. “I’m for no more.”
The White House meeting followed the Senate’s rejection yesterday of a pair of partisan proposals to replace the spending reductions. No additional congressional action is planned before the start of the cuts, to be split between defense and non-defense spending.
Neither chamber of Congress was in session today. Legislative business isn’t scheduled until March 4.
Stocks erased losses today. The Standard & Poor’s 500 Index slipped less than 0.1 percent to 1,514.47 at 10:43 a.m. in New York, after declining as much as 0.9 percent earlier. The Dow Jones Industrial Average rose 5.45 points, or less than 0.1 percent, to 14,059.94.
Treasuries rose for a second day, with 10-year yields headed for the biggest weekly drop since September. The 10-year yield fell two basis points, or 0.02 percentage point, to 1.86 percent at 10:54 a.m. New York time, leaving it 10 basis points lower this week, the biggest drop since Nov. 9, according to Bloomberg Bond Trader prices.
Obama and Republicans have traded blame this week for the impasse. The president and members of his Cabinet drew a picture of lost jobs, long lines at airports, delays at ports, furloughs of Pentagon employees and cutbacks at popular national parks as a result of the cuts.
Still, most of the effects of the across-the-board cuts probably won’t be seen for weeks, giving both sides more time to strike a deal.
“This is going to be a slow-rolling deal,” David Axelrod, a former top White House adviser and Obama campaign strategist, said today on MSNBC’s “Morning Joe” program. While some communities will see an impact, most won’t, he said, adding that the public is suffering “fatigue” over Washington’s budget battles and many have “tuned out.”
It’s going to be “an accident in slow motion,” said Melody Barnes, Obama’s former domestic policy adviser.
Obama told congressional leaders this week that “he hoped we all came with the idea that we would find solutions,” Pelosi of California told reporters yesterday when asked about the White House meeting.
While Boehner said yesterday he would be “happy” to work with the president on finding alternative spending cuts, congressional Republicans said they viewed today’s meeting as no more than a public relations move.
“There will be no last-minute, back-room deal and absolutely no agreement to raise taxes,” McConnell said in an e-mailed statement today.
“The president has organized a photo op,” Representative Tom Cole, an Oklahoma Republican, said in an interview.
White House spokesman Jay Carney said Feb. 27 that the president anticipates a “constructive conversation” with congressional leaders at the meeting, though probably not one that will immediately result in a compromise to stop the cuts from taking effect.
Yesterday’s votes in the Senate were symbolic and designed to give Democrats and Republicans political cover when the reductions take effect. Senators turned back a Democratic proposal, 51-49, and a Republican plan, 38-62, with 60 votes required for each measure.
The 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 Senate Republicans’ proposal would have retained the $85 billion in cuts this year 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, a Nevada Democrat, told reporters yesterday that a stopgap government funding measure will provide the next opportunity for Democrats to press for 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.”
Senate Democrats are preparing to offer a $1.043 trillion spending package to finance the government’s military and domestic discretionary programs for rest of the fiscal year that ends Sept. 30, said Barbara Mikulski, a Maryland Democrat and chairwoman of the Senate Appropriations Committee.
The Senate plan, which wouldn’t reflect the automatic spending cuts, will be offered in place of a $974 billion spending measure the Republican-led House is preparing to vote on next week. The House proposal would keep the spending cuts.
Unless there is 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,” said Senator John McCain, an Arizona Republican. “That’s my hope.”
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