President Barack Obama’s call for Congress to postpone automatic spending cuts is landing at the doorstep of Senate Democrats to propose how to replace the reductions scheduled to take effect March 1.
Obama yesterday urged lawmakers to act on a short-term package of spending cuts and tax-code changes, such as limiting tax breaks, to replace part of the $1.2 trillion in across-the- board reductions.
“Deep, indiscriminate cuts to things like education and training, energy and national security will cost us jobs and slow down our recovery,” Obama said at the White House. “This doesn’t have to happen.”
The March 1 deadline marks another fiscal showdown between the administration and Republicans, who control the House of Representatives. Republican leaders have said they expect the spending cuts to take effect, because they won’t agree to new tax revenue that Obama and other Democrats are seeking along with a different blend of spending cuts.
“We believe there is a better way to reduce the deficit, but Americans do not support sacrificing real spending cuts for more tax hikes,” House Speaker John Boehner, an Ohio Republican, said yesterday in a statement.
“If Democrats have ideas for smarter cuts, they should bring them up for debate,” Senate Minority Leader Mitch McConnell of Kentucky said in a statement. “The American people will not support more tax hikes in place of the meaningful spending reductions both parties already agreed to.”
[h=2]Tax Changes[/h]Democrats who control the Senate debated alternatives for replacing the spending cuts during a closed-door retreat yesterday in Annapolis, Maryland.
They agreed they should pursue a measure to replace the cuts with a combination of new tax revenue and a different set of spending reductions, said a Senate Democratic aide who spoke on condition of anonymity because the meeting was private. The lawmakers didn’t decide on details or how long the spending cuts should be delayed, the aide said.
Obama didn’t specify what tax changes he would seek. He has said previously that 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.
[h=2]Broader Overhaul[/h]Democrats and the president say delaying the spending cuts would give Democrats and Republicans time to work on a broader overhaul of the U.S. tax code and entitlement programs that contribute to the budget deficit.
“We are not going to have multiple bites at this apple,” Senator Max Baucus of Montana, chairman of the Finance Committee, said in a statement. “I want to ensure that when we do tax reform, we do it right.”
The president framed the debate in economic terms. “Our economy right now is headed in the right direction and will stay that way as long as there aren’t any more self-inflicted wounds coming out of Washington,” Obama said.
While there are signs of strength in the housing market and gains in hiring, forecasters predict a slower U.S. economic expansion as tax increases and spending cuts crimp growth and demand for exports drops with a weakening global economy.
[h=2]Lower Spending[/h]After the U.S. economy advanced at a 3.1 percent annual rate in the third quarter, the government reported last week that it stalled in the final three months of the year, registering a 0.1 percent decline in part because of lower defense spending. The median estimate of economists surveyed by Bloomberg is for growth of just 2 percent this year.
Congress created the automatic cuts in August 2011 as part of an agreement to raise the U.S. debt ceiling. They were set to take effect in January, though lawmakers delayed the reductions for two months in a Jan. 1 measure that let tax rates rise on top incomes.
During Senate Democrats’ retreat yesterday, leaders including Patty Murray of Washington, chairwoman of the Budget Committee, and Appropriations Committee Chairwoman Barbara Mikulski of Maryland were scheduled to address lawmakers on fiscal issues.
Senate Majority Leader Harry Reid said Jan. 29 that Democrats would ensure that action on the spending cuts “involves revenue.”
“There are many low-hanging pieces of fruit out there that Republicans have said they agreed on previously,” Reid, a Nevada Democrat, told reporters, citing one that addresses oil companies.
[h=2]Oil Companies[/h]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.
Republicans say they won’t accept any tax increase, let alone corporate changes they call gimmicks, to prevent the spending cuts from occurring.
In an interview on Bloomberg Television yesterday, House Majority Leader Eric Cantor said Democrats and the president have been “absent” in working toward fiscal discipline. “All we hear from this president is ‘we’ve got to raise people’s taxes.’ That’s just not the answer,” said the Virginia Republican.
Boehner and House Budget Committee Chairman Paul Ryan, a Wisconsin Republican, have said they expect the full spending cuts to take effect.
[h=2]Food Stamps[/h]Last year, the House passed a bill to replace the reductions with curbs to entitlements and other programs, including federal food stamps. It also would have ended the child tax credit for non-U.S. citizens.
The parties also may clash over how to fund the government for the rest of the fiscal year. Current legislation funding government operations expires March 27.
House Republican leaders are considering a stopgap measure to fund the government through Sept. 30 at a cost of about $974 billion, less than the current $1.043 trillion budget, said Representative James Lankford, an Oklahoma Republican.
To contact the reporter on this story: Heidi Przybyla in Washington at [email protected]
To contact the editor responsible for this story: Jodi Schneider at [email protected]
Obama yesterday urged lawmakers to act on a short-term package of spending cuts and tax-code changes, such as limiting tax breaks, to replace part of the $1.2 trillion in across-the- board reductions.
“Deep, indiscriminate cuts to things like education and training, energy and national security will cost us jobs and slow down our recovery,” Obama said at the White House. “This doesn’t have to happen.”
The March 1 deadline marks another fiscal showdown between the administration and Republicans, who control the House of Representatives. Republican leaders have said they expect the spending cuts to take effect, because they won’t agree to new tax revenue that Obama and other Democrats are seeking along with a different blend of spending cuts.
“We believe there is a better way to reduce the deficit, but Americans do not support sacrificing real spending cuts for more tax hikes,” House Speaker John Boehner, an Ohio Republican, said yesterday in a statement.
“If Democrats have ideas for smarter cuts, they should bring them up for debate,” Senate Minority Leader Mitch McConnell of Kentucky said in a statement. “The American people will not support more tax hikes in place of the meaningful spending reductions both parties already agreed to.”
[h=2]Tax Changes[/h]Democrats who control the Senate debated alternatives for replacing the spending cuts during a closed-door retreat yesterday in Annapolis, Maryland.
They agreed they should pursue a measure to replace the cuts with a combination of new tax revenue and a different set of spending reductions, said a Senate Democratic aide who spoke on condition of anonymity because the meeting was private. The lawmakers didn’t decide on details or how long the spending cuts should be delayed, the aide said.
Obama didn’t specify what tax changes he would seek. He has said previously that 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.
[h=2]Broader Overhaul[/h]Democrats and the president say delaying the spending cuts would give Democrats and Republicans time to work on a broader overhaul of the U.S. tax code and entitlement programs that contribute to the budget deficit.
“We are not going to have multiple bites at this apple,” Senator Max Baucus of Montana, chairman of the Finance Committee, said in a statement. “I want to ensure that when we do tax reform, we do it right.”
The president framed the debate in economic terms. “Our economy right now is headed in the right direction and will stay that way as long as there aren’t any more self-inflicted wounds coming out of Washington,” Obama said.
While there are signs of strength in the housing market and gains in hiring, forecasters predict a slower U.S. economic expansion as tax increases and spending cuts crimp growth and demand for exports drops with a weakening global economy.
[h=2]Lower Spending[/h]After the U.S. economy advanced at a 3.1 percent annual rate in the third quarter, the government reported last week that it stalled in the final three months of the year, registering a 0.1 percent decline in part because of lower defense spending. The median estimate of economists surveyed by Bloomberg is for growth of just 2 percent this year.
Congress created the automatic cuts in August 2011 as part of an agreement to raise the U.S. debt ceiling. They were set to take effect in January, though lawmakers delayed the reductions for two months in a Jan. 1 measure that let tax rates rise on top incomes.
During Senate Democrats’ retreat yesterday, leaders including Patty Murray of Washington, chairwoman of the Budget Committee, and Appropriations Committee Chairwoman Barbara Mikulski of Maryland were scheduled to address lawmakers on fiscal issues.
Senate Majority Leader Harry Reid said Jan. 29 that Democrats would ensure that action on the spending cuts “involves revenue.”
“There are many low-hanging pieces of fruit out there that Republicans have said they agreed on previously,” Reid, a Nevada Democrat, told reporters, citing one that addresses oil companies.
[h=2]Oil Companies[/h]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.
Republicans say they won’t accept any tax increase, let alone corporate changes they call gimmicks, to prevent the spending cuts from occurring.
In an interview on Bloomberg Television yesterday, House Majority Leader Eric Cantor said Democrats and the president have been “absent” in working toward fiscal discipline. “All we hear from this president is ‘we’ve got to raise people’s taxes.’ That’s just not the answer,” said the Virginia Republican.
Boehner and House Budget Committee Chairman Paul Ryan, a Wisconsin Republican, have said they expect the full spending cuts to take effect.
[h=2]Food Stamps[/h]Last year, the House passed a bill to replace the reductions with curbs to entitlements and other programs, including federal food stamps. It also would have ended the child tax credit for non-U.S. citizens.
The parties also may clash over how to fund the government for the rest of the fiscal year. Current legislation funding government operations expires March 27.
House Republican leaders are considering a stopgap measure to fund the government through Sept. 30 at a cost of about $974 billion, less than the current $1.043 trillion budget, said Representative James Lankford, an Oklahoma Republican.
To contact the reporter on this story: Heidi Przybyla in Washington at [email protected]
To contact the editor responsible for this story: Jodi Schneider at [email protected]