Democrats seek to stave off $1 trillion in cuts

Jonathan Weisman, New York Times News Service

Thursday, Feb. 7, 2013 | 12:15 a.m.

WASHINGTON — With at least 1 million jobs on the line, Senate Democrats on Wednesday said they were closing in on legislation to temporarily head off nearly $1 trillion in cuts that were already affecting Pentagon decision-making and could force significant reductions in staffing and services across the government.

Despite strong resistance from Republican leaders to new tax revenues, Democrats said that they expected the onset of federal furloughs and layoffs on March 1 to make Republicans more receptive to an emerging solution that would combine spending cuts with revenue from closing tax loopholes. Lawmakers were being spurred by increasingly dire warnings from top Pentagon officials about the implications of the automatic reductions.

“This is not a game; this is reality,” Defense Secretary Leon Panetta said emphatically in a speech Wednesday at Georgetown University, as he warned that the cuts would curtail U.S. naval operations in the western Pacific by as much as a third and force one-month furloughs for as many as 800,000 Defense Department civilian employees starting this spring.

“These steps would seriously damage the fragile American economy, and they would degrade our ability to respond to crisis precisely at a time of rising instability across the globe,” he said.

Within hours of the speech, the Pentagon announced that the pending budget cuts had forced it to delay the deployment of a second aircraft carrier to the crucial Persian Gulf, leaving only one near the Strait of Hormuz and the coastline of Iran after March. Because of the tensions in the region, the Pentagon has kept two carriers in the area for most of the last two years.

At a closed-door retreat in Annapolis, Md., this week, Senate Democratic leaders struck a populist tone. They suggested they could rally public support for a measure that would temporarily suspend the cuts by limiting tax breaks for oil and gas exploration, reducing the tax advantages for wealthy private-equity employees who pay a lower 20 percent capital gains rate on much of their income, and ending tax deductions for the cost of moving business functions overseas.

A presentation by Sen. Patty Murray of Washington, who spoke along with Sens. Max Baucus of Montana and Barbara Mikulski of Maryland, described the income gains of the richest 1 percent of Americans amid rising poverty and stagnating middle-class incomes.

“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,” said Rep. Chris Van Hollen of Maryland, the ranking Democrat on the House Budget Committee.

Republican leaders are no less firm that the cuts 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 Boehner of Ohio said Wednesday. “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.”

While federal officials have historically warned of government disruptions to avoid cutbacks, the potential impact of the cuts is being cited by both parties. Sen. John McCain, R-Ariz., said the military side alone would eliminate 350,000 jobs directly, and 650,000 more that depend on the government programs.

Domestic programs, from the National Institutes of Health to the Education Department, would be hit nearly as hard. The Army would cut intelligence and surveillance aircraft and pull back on efforts to counter roadside bombs. Defense Department furloughs would potentially begin as early as April and would cut one work day a week from the Pentagon’s vast civilian workforce for the next six months. The employees would face a corresponding 20 percent cut in pay.

At a House Democratic retreat in Virginia on Thursday, Rep. Nita Lowey of New York is expected to lay out the domestic side. About 10 percent of the Federal Aviation Administration’s 40,000 workers would be furloughed. Because meat and poultry inspectors would be kept home, food plants that cannot operate without them would have to be shuttered. Coast Guard air and surface operations would be down nearly 25 percent.

Wait times at the nation’s busiest airports could rise as much as three hours with the furloughing of customs agents. Some 70,000 children would be dropped from Head Start. And as Republicans continue to delve into the deaths of four Americans at the U.S. diplomatic mission in Benghazi, Libya, the State Department would have to absorb a $168 million cut to embassy security.

Both parties are showing 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, Rep. Rob Bishop, R-Utah, did not rule out supporting a Senate bill that closed tax loopholes and cut spending to stave off the cuts.

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

Republican leaders of the Senate and the House Armed Services Committees proposed Wednesday to cancel the Pentagon cuts for 2013 by applying savings from a 10 percent cut in the federal workforce over the next decade.

Most of the Armed Services Republican leaders were steadfast in their opposition to any more tax increases to resolve the impasse. After describing the situation as “desperate,” Sen. James Inhofe of Oklahoma, the ranking Republican on the Senate committee, added, “It’s not desperate enough to raise taxes.”

The cuts were required in 2011 when a special House-Senate committee was unable to come up with a compromise plan to reduce the deficit.

But Sen. Lindsey Graham, R-S.C., said both parties bear responsibility for agreeing to the cuts to force a bipartisan deficit deal that remains out of reach.

“We got into this mess together,” he said. “We’re going to have to get out of it together.”

House Democrats produced legislation that would stave off the cuts through Sept. 30 by ending direct subsidy payments to agribusinesses, eliminating tax breaks for oil and gas companies, and establishing a minimum 30 percent effective tax rate on annual incomes over $1 million.