Two Parties Map Strategy on Automatic Budget Cuts

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.

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