G.O.P. Is Resisting Obama Pressure on Tax Increase

WASHINGTON — House Republicans, shrugging off rising pressure from President Obama, are resolutely opposing new tax increases to head off $85 billion in across-the-board spending reductions, all but ensuring the cuts will go into force March 1 and probably remain in place for months, if not longer.

Representative Martha Roby, Republican of Alabama, said on Wednesday, "It's unconscionable to use our military men and women in uniform as a bargaining chip to raise our taxes."

Seeking to Avoid the SequesterDespite new calls from the White House on Wednesday to enact a combination of tax increases and cuts to postpone the so-called sequester, the House is moving forward on a legislative agenda that assumes deep and arbitrary cuts to defense and domestic programs — once considered unthinkable — will remain in place through the end of the year.

Congressional Republicans have relented in the most recent fiscal showdowns with the White House. But lawmakers say they have no intention of surrendering in this one even though Mr. Obama has raised the potential of widespread disruptions in government services and even military operations in the weeks ahead. The president’s January fiscal victory, which yielded increases in income, capital gains and dividend tax rates on affluent families, has only bolstered Republican resolve.

“The president says he has to have tax increases to head off the sequester. Well, he already got his tax increase,” Representative Martha Roby, Republican of Alabama, said in an interview Wednesday after visiting the town just outside of the Army’s Fort Rucker, which stands to take a deep hit this spring. “It’s unconscionable to use our military men and women in uniform as a bargaining chip to raise our taxes.”

House Republicans say they believe they have politically inoculated themselves against claims they are responsible for the cuts by approving measures last year that would have substituted reductions in government programs like food stamps for the lower Pentagon spending. Party strategists have advised Republican members to aggressively blame the president for the creation of the automatic cuts and the failure to stop them.

Taking steps to avoid a full government shutdown at the end of March, the House Appropriations Committee as soon as next week will introduce legislation to keep the government financed through Sept. 30, the end of the fiscal year, but do nothing to stop the pending cuts.

The current stopgap spending measure expires March 27, and Republican leaders are eager to avoid an Easter-week shuttering of the government. In recent days, Mr. Obama has sought to force Republicans into negotiations: a Saturday radio address criticizing “the current Republican plan” that “puts the burden of avoiding those cuts mainly on seniors and middle-class families”; a news conference on Tuesday with uniformed first responders whose jobs might be threatened; and on Wednesday, local television interviews broadcast in eight media markets, from Hawaii to South Carolina, urging Republicans to accept his “balanced approach” to unwind the cuts or accept responsibility for their consequences.

But House Republicans say they are feeling invulnerable in the current clash. Not only can they point to last year’s bills to replace the cuts, but redistricting has made most of them immune to political threats and entreaties. For many representing conservative districts where the president holds little sway, an attack by Mr. Obama is a badge of honor, senior Republican House aides say.

In the last showdowns won by the president, inaction was seen as intolerable. Had Republicans done nothing in 2011, a temporary payroll tax would have lapsed without offsetting tax cuts to ease the blow. On Jan. 1, every tax cut of the Bush administration would have expired at once had the Republicans not relented and let some taxes rise. This time, Republicans need not do anything and deep spending cuts they have demanded for years will go into force automatically.

Speaker John A. Boehner wrote in an opinion piece in The Wall Street Journal on Wednesday: “As the president’s outrage about the sequester grows in coming days, Republicans have a simple response: Mr. President, we agree that your sequester is bad policy. What spending are you willing to cut to replace it?”

And the speaker sought to turn the blame back on the president after Defense Secretary Leon E. Panetta on Wednesday fired off a letter, warning that he will have to furlough a large number of Pentagon civilian staff members, “forgo critical objectives” and “do real harm to our national security” because of the cuts.

This article has been revised to reflect the following correction:

Correction: February 20, 2013

An earlier version of the article inaccurately identified the military base Representative Martha Roby had toured. It was Fort Rucker, not Maxwell Air Force Base.

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Democrats weigh short-term debt limit increase (Reuters)

WASHINGTON (Reuters) – Senate Democrats have discussed with President Barack Obama a scaled-back budget deal that would avert a looming default but force Congress to tackle the politically toxic issue again before the 2012 elections, a Senate Democratic aide told Reuters on Thursday.

Such a deal would cover the country's borrowing needs for seven months, the aide said, adding it is one of a handful of options discussed in meetings. A seven-month debt limit increase theoretically would include budget savings of roughly $1 trillion to attract the Republican support needed to pass it through Congress.

The White House said it was not considering the plan.

"The president has consistently said it's in the country's best economic interests for Congress to reach common ground on a significant long-term deficit reduction package," White House deputy communications director Jen Psaki said.

"He has been clear in conversations with leaders in both parties about that."

Senate Democratic leader Harry Reid told reporters, "We're working on a number of different proposals," adding, "We discussed four of them with the president yesterday."

Congress must raise the $14.3 trillion debt ceiling by August 2 to avoid a default that could push the United States back into recession and send financial markets plummeting.

For months, there has been speculation that if Obama and congressional Republicans can't agree on deep enough savings, they might have to move toward a shorter-term debt limit hike -- as politically distasteful as that is -- and then hold another round of budget talks in coming months.

Last week, negotiations led by Vice President Joe Biden collapsed over tax hikes. Democrats say spending cuts should not be the only component of a deficit-reduction package that would make it easier for lawmakers to sign off on further borrowing.

Meanwhile, Treasury Secretary Timothy Geithner, sought to quell speculation he could be headed for the exit once a budget deal is struck.

"People are a little worried or interested because I have a family, my son's going back to New York to finish high school and I'm going to be commuting for awhile -- but I'm going to be doing this for the foreseeable future," he said in Chicago at an event with former President Bill Clinton.

Democrats have stepped up their attacks in recent days, challenging Republicans to defend tax breaks for corporate jets, race horses and yachts that benefit the wealthy that they want to close as part of the deal.

Democratic Senator Jeff Merkley called the racehorse tax break the "bluegrass boondoggle" in a slap at Senate Republican leader Mitch McConnell, whose home state of Kentucky is famous for horse racing.

The White House believes a deal needs to be in place by July 22 to give Congress enough time to pass it, according to Democratic officials familiar with the talks.

Bank regulator Sheila Bair said markets could be spooked well before August 2 if they see no signs of progress.

"Why even go there? Why even flirt with it?" Bair, the outgoing chairman of the Federal Deposit Insurance Corp, told the Senate Banking Committee.

Reid canceled a planned break during the week of the July 4 Independence Day holiday to keep the Senate in session at Obama's request.

With the country borrowing roughly $150 billion per month, a seven-month deal would require a debt-limit hike of roughly $1 trillion. Negotiators had tentatively agreed on at least that amount of spending cuts before talks collapsed.

'A STAY OF EXECUTION'

A short-term deal could weaken the dollar and push up Treasury yields if investors and debt-rating agencies conclude that Washington does not have the stomach to confront its fiscal ills.

"A temporary increase is just a stay of execution. They will have to make these difficult decisions at some point," said Ward McCarthy, a top economist at Jefferies & Co.

Other ideas that Democrats are considering include a bigger deal that would extend U.S. borrowing authority through 2012, which would probably require more than $2 trillion in budget savings over 10 years. Another option would include longer-term spending cuts totaling $4 trillion.

Democratic Senator Charles Schumer said Republicans are blocking job-creation ideas in a budget deal in order to pin the sluggish economy on Obama in the November 2012 elections.

"Republicans aren't just opposing the president any more," Schumer said at the Economic Policy Institute, a liberal think tank. "They are opposing the economic recovery itself."

Republicans said the tax hikes Democrats want would worsen the 9.1 percent jobless rate.

"When the president talks about raising taxes, he's talking about killing jobs," said Republican Senator Jon Kyl.

Budget deficits in recent years have hovered near their highest levels relative to the size of the economy since World War Two. The deficit for the current fiscal year, which ends September 30, is projected to hit $1.4 trillion.

(Additional reporting by Alister Bull, Dave Clarke, Thomas Ferraro, Jeff Mason, Donna Smith and Deborah Charles in Washington and Ellen Freilich in New York; Editing by Eric Walsh)

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