Congress Leaders to Meet With Obama as Budget Cuts Begin

(Bloomberg)



President Barack Obama’s meeting with congressional leaders today won’t yield a breakthrough to avert $85 billion in federal spending cuts set to start before midnight, members of both parties say.
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, will attend the morning meeting.
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 press conference in Washington yesterday. “I’m for no more.”
The White House meeting follows 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.
Market Reaction
Stocks erased gains in the final half hour of trading yesterday after the Senate votes. The Standard & Poor’s 500 Index fell 0.1 percent to 1,514.68 at 4 p.m. in New York, after rising as much as 0.6 percent earlier. The Dow Jones Industrial Average lost 20.88 points, or 0.2 percent, to 14,054.49.
Treasury 10-year notes gained for the first month since November. The yield fell three basis points, or 0.03 percentage point, to 1.88 percent at 5 p.m. in New York, 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.
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.
Public Relations
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.
“The president has organized a photo op,” Representative Tom Cole, an Oklahoma Republican, said in an interview.
The session’s purpose is “mostly optics,” said Senator John Thune, a South Dakota Republican. “The president was feeling pressure to do something to show that he’s trying to resolve this and so he called a last-minute meeting,” Thune told reporters yesterday. “I don’t think that fools anybody.”
White House spokesman Jay Carney said Feb. 27 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.
Symbolic Votes
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.
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.
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.
‘All Done’
“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.
Economic Growth
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.”
“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.”