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Not much urgency to avoid automatic spending cuts

Published: Wednesday, Feb. 20, 2013 5:30 a.m. CDT

(Continued from Page 1)

WASHINGTON – Ten days before a new deadline for broad, automatic government spending cuts, the sense of urgency that surrounded other recent fiscal crises is absent. Government agencies are preparing to absorb an $85 billion hit to their budgets, and politicians, at least for now, seem willing to accept the consequences.

President Barack Obama, back from a Florida golfing weekend, warned Tuesday that “people will lose their jobs” if Congress doesn’t act. But lawmakers weren’t in session to hear his appeal, and they aren’t coming back to work until next week.

Still dividing the two sides are sharp differences over whether tax increases, which Obama wants and Republicans oppose, should be part of a budget deal.

Obama cautioned that if the immediate spending cuts – known as sequestration – occur, the full range of government will feel the effects. Among those he listed: furloughed FBI agents, reductions in spending for communities to pay police, firefighters and teachers, and decreased ability to respond to threats around the world.

“So far at least, the ideas that the Republicans have proposed ask nothing of the wealthiest Americans or the biggest corporations,” Obama said at a White House event. “So the burden is all on the first responders, or seniors or middle class families.”

Aides say Obama is ready to take his case more directly to the public to pressure Republicans, either by traveling to vulnerable states or, as the White House often does, through local media interviews. They say neither Obama nor White House officials are engaged in direct negotiations with Republican leaders.

The spending cuts, however, aren’t perceived to be as calamitous as the threatened results of recent fights over the nation’s borrowing authority and the “fiscal cliff” that would have cut spending and increased tax rates on all Americans paying income taxes. Failure to raise the debt ceiling would have left the government with no money to spend on myriad programs and could have precipitated an unprecedented default. The fiscal cliff had the potential of setting back the economic recovery.

In fact, many Republicans now see the automatic cuts in spending as the only way to tackle the federal deficit. Some liberals won’t balk either because they want cuts in Pentagon spending. And many Democrats believe the cuts will have to materialize before Republicans agree to some increase in taxes.

“Some Democrats want it because of the defense cuts, and Republicans want it because they want to do anything to cut domestic spending,” said Brendan Daly, a former top aide to Rep. Nancy Pelosi, the former House speaker and now Democratic leader. “And politically, it’s difficult to oppose because the impact won’t be so severe right away.”

Democratic consultant Jim Manley, a former Senate leadership aide who periodically consults with Obama officials, added: “Not only do I expect the sequester to kick in, but unfortunately it will take a couple of temporary government shutdowns before Republicans realize they need to sit down and negotiate in good faith.”

White House officials say they believe Republican House Speaker John Boehner of Ohio will ultimately relent in his opposition to additional taxes. They note that despite his initial stand against increasing tax rates in December, he eventually allowed a House vote to proceed raising the top rate on the wealthiest taxpayers.

Not this time, he said Tuesday: “The American people understand that the revenue debate is now closed.”

House Republicans have proposed an alternative to the broad, immediate budget cuts, targeting specific spending and extending some of the reductions over a longer period of time. They also have said they are willing to undertake changes in the tax code and eliminate loopholes and tax subsidies. But they have said they would overhaul the tax system to reduce rates, not to raise revenue.

Boehner said in a statement following Obama’s remarks: “Tax reform is a once-in-a generation opportunity to boost job creation in America. It should not be squandered to enable more Washington spending. Spending is the problem, spending must be the focus.”

Tuesday’s exchanges came as the co-chairs of a bipartisan deficit-reduction commission called for reducing the deficit by $2.4 trillion over the next 10 years, with much of the savings coming through health care changes, the closing of tax loopholes, a stingier adjustment of Social Security’s cost-of-living increases and other measures.

The proposal by Republican former Sen. Alan Simpson of Wyoming and Democrat Erskine Bowles, the former chief of staff for President Bill Clinton, calls for about one-quarter of the savings to come from changes in health care programs and another quarter from revenue generated by tax changes.

In their plan, Bowles and Simpson say the automatic cuts scheduled for March 1 are too steep and could set back the economy.

“Sharp austerity could have the opposite effect by tempering the still-fragile economic recovery. In order to protect the recovery, the sequester should be avoided and deficit reduction should be phased in gradually,” they wrote.

Obama has proposed about $1.5 trillion in long-term deficit reduction with savings from changes in health care programs, lower cost-of-living adjustments in Social Security and other government benefits, spending cuts and increases in revenue by overhauling the tax system

The White House says any elimination of corporate subsidies or tax breaks would be used to lower rates for corporations to 28 percent and to 25 percent for manufacturers, not to raise revenue.

Under Obama’s plan, additional revenue of about $600 billion over 10 years would mostly come from reducing the value of itemized deductions and other tax preferences to 28 percent for families with incomes over $250,000.

Even as Obama and Republicans battle over the automatic cuts, Congress is also struggling over how to fund the government through the Sept. 30 end of the fiscal year. Every federal agency has been running on autopilot at essentially last year’s funding level since October.

The Pentagon, for instance, has been denied long-sought increases for training and readiness, especially for the Navy and Marine Corps. House Appropriations Committee Chairman Harold Rogers, R-Ky., favors attaching a half-trillion-plus Pentagon funding bill and another measure funding veterans’ programs to a spending bill that would pay for government operations for the final six months of the budget year.

Senate Democrats appear cool to the idea of permitting only defense-related spending measures to advance.

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