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Threat of Spending Cuts to Influence State of the Union Speech

4:32 PM, Feb 8, 2013   |    comments
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By BRIAN TUMULTY
Gannett Washington Bureau

WASHINGTON - About $85 billion in spending cuts scheduled to take effect March 1 are casting a cloud over the second-term agenda President Barack Obama is expected to lay out Tuesday in his State of the Union speech.

Obama's proposals to reduce gun violence, overhaul immigration laws and boost economic growth will depend on bipartisan cooperation from Congress.

But achieving such cooperation will prove challenging, with the White House and Congress again facing gridlock over a self-inflicted financial crisis.

This one is known as "sequestration."

The term refers to the automatic spending cuts included in an August 2011 deal to raise the nation's debt ceiling. The cuts were designed to be so draconian that lawmakers would feel compelled to avoid them by coming up with a less drastic option for reducing deficits.

But that hasn't happened.

"Sequestration is a fancy word for Congress screwing up the economy for no reason,'' said New York Rep. Sean Maloney, D-Cold Spring. "We can control government spending and grow the economy the way we did in the Clinton administration. Sequestration is a blunt instrument that was designed to be so bad that nobody would do it. Only in Washington would people be talking seriously about letting it happen.''

New York Republican Rep. Tom Reed of Corning views sequestration as one of the "big issues of the debt crisis and entitlement crisis that we face.''

"When you talk about these cuts, they are necessary to be made,' ' Reed said.

Three other New York House Republicans - Reps. Richard Hanna, Chris Gibson and Michael Grimm - will be among a bipartisan group of 40 lawmakers who plan to attend Tuesday's State of the Union speech wearing orange pins with the motto, "Stop Fighting, Start Fixing.''

The pins are the brainchild of No Labels, a bipartisan advocacy group with a 12-point platform for "fixing'' Congress, including "No Budget, No Pay'' legislation recently passed by the House and Senate as part of a temporary suspension of the nation's debt limit.

Under No Budget, No Pay, members of the House and Senate would have their salaries suspended if their respective chamber failed to pass a budget resolution.

Senate Democrats are committed to enacting a budget resolution this year for fiscal 2014, which begins Oct. 1, but that wouldn't solve the problem posed by the sequestration spending cuts. Those cuts originally were scheduled to take effect Jan. 1 but Congress agreed to postpone them until March 1.

Gibson thinks there's still time for Congress to take up the 2010 recommendations from the president's National Commission on Fiscal Responsibility and Reform, often referred to as the Simpson-Bowles Commission.

"What I'd like to hear from the president in State of the Union is that he's still in search of a grand agreement,'' Gibson said, suggesting Obama should challenge the House and Senate to modify the Simpson-Bowles recommendations with the goal of finding $4 trillion in savings over 10 years.

A grand agreement would convince the public to invest the approximately $3 trillion it's kept out of the markets, helping to create jobs and boost growth, Gibson said.

Economists say letting the scheduled spending cuts take effect could send the economy back into recession. Economic growth essentially stalled in the fourth quarter, according to the Commerce Department's Bureau of Economic Analysis. The agency's advance report that will be revised at the end of the month found economic activity shrank by a tiny 0.1 percent in the fourth quarter.
Reed said that not cutting spending is a bigger threat.

"Do I think it will lead to an immediate recession? No,'' Reed said "But obviously the cuts will have impact of an economic nature and that has to be recognized. But if we don't get our act together in regard to our fiscal house, that's going to be even worse long term.''
With only seven months remaining in fiscal 2013, sequestration would mean cutting defense programs about 13 percent and non-defense programs about 9 percent, the White House said Friday.

Administration officials said that would mean eliminating Head Start for 70,000 children, leaving an estimated 373,000 mentally ill adults and emotionally disturbed children untreated, and reducing small-business loan guarantees by $540 million.

Democrats on the House Appropriations Committee note that Congress already has cut discretionary spending by $1.5 trillion over 10 years, beginning in 2010, and sequestration would cut an additional $1.2 trillion.

Rep. Nita Lowey of Westchester County, the committee's ranking Democrat, said there's "a real worry'' sequestration will have a wide-ranging negative impact.

"You're talking about furloughs of air traffic controllers, food inspectors, border patrol, reduced investment in safe drinking water and medical research, diminished military readiness and embassy security,'' Lowey said.

She supports Obama's proposal to replace sequestration with a combination of tax increases and spending cuts that would allow the federal government to continue to invest in economic growth.

"We know we need responsible tax reforms like closing the tax loopholes for big oil to bring in new revenue,'' she said. "We can't just focus on cuts. We can't neglect our economy.''

Democratic Sen. Chuck Schumer of New York has a similar position.
"I'm for a balanced approach, which means closing tax loopholes like sending jobs overseas and the tax cuts the oil companies get, as well as making some responsible cuts,'' he said. "We need to do some of each to avoid sequestration.''

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