Two Parties Map Strategy on Automatic Budget Cuts

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WASHINGTON -- Congressional Democrats, sensing a shift in political momentum, said Wednesday that they were closing in on legislation to temporarily head off deep across-the-board spending cuts, convinced that once federal furloughs and layoffs begin next month, political pressure on Republicans to accept more tax increases will become irresistible.

At a closed-door retreat in Annapolis, Md., this week, Senate Democratic leaders struck a populist tone, urging the party to stand its ground in the battle over nearly $1 trillion in military and domestic cuts over 10 years, set to begin March 1. Democrats want a temporary reprieve from those cuts, financed by a mix of spending cuts and tax loophole closings that they believe will rally public support.

A presentation by Senator Patty Murray of Washington, who spoke along with Senators Max Baucus of Montana and Barbara Mikulski of Maryland, ran through the huge income gains of the richest 1 percent, amid rising poverty and stagnating middle-class incomes.

"Democrats need to keep fighting," Ms. Murray, the Senate Budget Committee chairwoman, concluded.

Representative Chris Van Hollen of Maryland, the ranking Democrat on the House Budget Committee, said, "Republicans ultimately have to choose whether they are more interested in protecting tax breaks for Big Oil and other special interests, or protecting defense spending and the economy."

Republican leaders are no less firm that the cuts -- known as sequestration -- will come into force in three weeks unless Democrats agree to equivalent spending cuts elsewhere in the budget, without tax increases.

"At some point, Washington has to deal with its spending problem," Speaker John A. Boehner of Ohio said Wednesday, his voice rising in frustration. "Now I've watched them kick this can down the road for 22 years since I've been here. I've had enough of it. It's time to act."

With the clock ticking and President Obama calling for some action, both parties are showing some cracks in their resolve. Some Republicans with large military installations in their districts said they could support a postponement in the military cuts while negotiations continued on a broader deficit reduction plan. Fearing for Hill Air Force Base, Representative Rob Bishop, Republican of Utah, did not rule out supporting a Senate bill that closes tax loopholes and pares spending to stave off the cuts.

"It would depend on what the details are," he said.

The Republican leaders of the Senate and House Armed Services Committees proposed Wednesday to cancel the military cuts for 2013 by roping off savings from a 10 percent cut in the federal work force over the next decade. Representative Howard P. McKeon of California, the chairman of the House Armed Services Committee, met on Tuesday with the commandant of the Marine Corps, General James F. Amos, who told him that he could maintain Marine Corps readiness this year, but that training and equipping Marines would drop off sharply in 2014 if the cuts went forward.

"These cuts are very harmful to the Department of Defense, especially to the Marine Corps," Mr. McKeon said.

House Democrats produced legislation that would stave off the cuts through Sept. 30 by ending direct subsidy payments to agriculture businesses, eliminating tax breaks for oil and gas companies, and establishing a minimum 30 percent effective tax rate on annual income over $1 million. Senate Democrats hope to produce a similar plan by the end of next week, aides at the Senate retreat said.

The targets include poll-tested, time-honored marks like limiting tax incentives for oil and gas exploration, "carried interest" that allows private equity titans to pay a low 20 percent capital gains rate on much of their income, and tax deductions for the cost of moving business functions overseas.

But Mr. Baucus, the chairman of the tax-writing Senate Finance Committee, may be standing in the way, saying any egregious business tax loopholes should be closed in a broad corporate tax code overhaul he hopes to produce this year.

"All things being equal, I think these things should be included in corporate tax reform," he said. "But," he allowed, "all things are not equal."

Senate Democrats had hoped to emerge from their two-day retreat in Annapolis with legislation ready for quick action. Now, aides said, they hope -- but cannot guarantee -- that they will have a bill before the weeklong Presidents' Day break, which begins Feb. 18. That would mean the Senate would have just four days to pass it before the March 1 deadline.

But, senior Democratic aides say, the real test will come not in early March but weeks later, when military contractors and agencies begin sending out notices of layoffs and unpaid furloughs. At that point, Democrats insist that the economics and the public will be on their side, and that Republicans will have to relent, as they have in recent fiscal showdowns.

The Murray presentation said the top 1 percent of earners had their incomes rise to $866,700 from $339,800 -- or 155 percent -- between 1979 and 2009, while the middle 20 percent of households had incomes rise to $57,100 from $43,100 -- or just 32 percent. Existing tax breaks increase the incomes of the top 1 percent by nearly $250,000 a year, but offer a tiny sliver of that to almost every other income group.

Meanwhile, Ms. Murray said, the poverty rate in 2011 hit 15 percent, up from 11.7 percent 10 years before. She cited polling that indicates that two-thirds of Americans say the top 2 percent should pay more in taxes, even after the January fiscal deal raised their taxes; 64 percent say corporations should pay more as well.

Republicans are pressing their own political points. The House on Wednesday easily passed legislation, 253 to 167, that would require Mr. Obama to submit a budget that either balances in 10 years or includes an addendum detailing when his plan would come into balance. On a vote of 348 to 75, the House rejected a bipartisan amendment that called for Mr. Obama to base his budgeting on the deficit reduction framework of the president's own deficit commission, named after the panel's chairmen, Erskine B. Bowles and Alan K. Simpson. On that vote, 54 Democrats and 21 Republicans voted yes, only marginally better than the 38 House members who voted last year for the Simpson-Bowles plan.

The House will vote next week on whether to override an Obama executive order and rescind pay increases for federal employees this year, including members of Congress, the president's cabinet and Vice President Joseph R. Biden Jr.


This article originally appeared in The New York Times.


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