The Democratic panic begins over spending cuts

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http://www.bloomberg.com/news/2013-02-0 ... -cuts.html

Democratic Consensus Growing on Short Spending-Cut Delay
By Heidi Przybyla - Feb 5, 2013 12:00 AM ET

A consensus is growing among U.S. Senate Democrats to seek a short-term replacement for the $1.2 trillion in automatic federal spending cuts scheduled to take effect March 1, two Democratic aides said.

Democrats plan to debate options for replacing part of the cuts during a closed-door retreat today in Annapolis, Maryland. Senate leaders including Patty Murray of Washington, chairwoman of the Budget Committee, and Appropriations Committee Chairwoman Barbara Mikulski of Maryland will address lawmakers on fiscal issues including ways to offset the reductions, the aides said.

There is no agreement on what options Democrats will choose or how big the plan should be, said both aides, who sought anonymity to discuss the private talks. One alternative would be a $50 billion package of spending reductions and higher revenue to cover a five-month delay of the automatic cuts, one of the aides said.

Senate Majority Leader Harry Reid said Jan. 29 that Democrats would have a presentation on the spending cuts at the retreat.

“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 deals with oil companies.

“We’re going to make an effort to make sure” that action on the spending cuts “involves revenue,” Reid said.

Congress created the automatic cuts in August 2011 as part of an agreement to raise the U.S. debt ceiling. The reductions were originally to begin in January, though Congress delayed them for two months as part of a Jan. 1 plan that let tax rates rise on income of top earners.
Oil Companies

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.

Another option, taxing private equity managers’ carried interest as ordinary income instead of at the lower capital- gains rate, would raise about $16.8 billion, according to the nonpartisan Joint Committee on Taxation.

Republicans say they won’t accept any tax increase, let alone corporate changes they call gimmicks, to prevent the spending cuts from occurring.

“The challenge we face right now is the fact that government spending is completely out of control,” Senator Mitch McConnell of Kentucky, the Republican leader, said yesterday on the Senate floor. “So to focus on a tax of any kind is to miss the point entirely.”
Boehner, Ryan

House Speaker John Boehner of Ohio and House Budget Committee Chairman Paul Ryan of Wisconsin, both Republicans, have said they expect the full spending cuts to take effect.

While Defense Secretary Leon Panetta once called the automatic cuts a “doomsday mechanism,” Deputy Defense Secretary Ashton Carter said in a Jan. 29 interview that it is “more likely than unlikely” they will take effect.

Defense programs would be cut by 7.3 percent, or $42.7 billion, during the last seven months of fiscal 2013. Non- defense budgets would be trimmed by $42.7 billion.

Many programs that Democrats care most about would be reduced. Obama’s Office of Management and Budget said the plan would make reductions of 2 percent to Medicare providers and 7.6 percent to non-defense programs such as temporary assistance for needy families.