Automatic budget cuts to happen: Senator McConnell
WASHINGTON (Reuters) - The Senate's top Republican predicted on Tuesday that automatic spending cuts will take effect on March 1 as scheduled.
Senate Minority Leader Mitch McConnell said he did not expect some last-minute deal to materialize that would avert the cuts, known in budget jargon as a "sequester."
"Read my lips: I'm not interested in an 11th-hour negotiation," McConnell told reporters.
"It's pretty clear to me that the sequester's going to go into effect," McConnell said. "I have seen no evidence that the House plans to act on this matter before the end of the month."
The across-the-board cuts were set in motion in August 2011 as part of a deficit-reduction deal between Republicans and Democrats.
They were supposed to be so draconian that Congress would be inspired to replace them with more thoughtful ways of reducing the budget deficit.
But Republicans and Democrats have been unable to agree on a substitute for the sequester.
The cuts will be split evenly between military programs and domestic discretionary spending, with the first seven months' worth coming to about $85 billion if Congress fails to act before March 1.
Republican House Speaker John Boehner has declined to reintroduce legislation passed by the House last year that would shift the cuts from the military to other domestic programs, such as the Medicaid healthcare program for the poor.
Instead, he has simply pinned blame for the looming cuts on President Barack Obama and his fellow Democrats.
U.S. Defense Department officials warned lawmakers on Tuesday that the military portion of these cuts will erode U.S. war fighting capability, force the furloughing of some 800,000 civilian employees for 22 days, and slash ship and aircraft maintenance.
Democrats on Thursday will unveil a $120 billion plan that replaces the cuts for 10 months, half with increased tax revenue and half with more targeted cuts.
Aides have said in recent days that the plan would include reductions in farm subsidies, a higher minimum tax rate for income over $1 million, and an end to tax breaks for oil companies and corporate jets.
"The bills being drafted will include equal amounts of revenue and cuts, because Democrats believe the right way to reduce the deficit is to target waste and abuse by pairing smart spending cuts with closing tax loopholes, asking the wealthiest Americans to contribute more," Senate Majority Leader Harry Reid told reporters.
McConnell made clear that Republicans would not accept any new tax increases after agreeing to swallow a tax hike on family income above $450,000 in the January 1 fiscal cliff deal.
"The tax issue's over. The president got his taxes at the end of the year, not because people voted for it, but because operation of law sent taxes up for Americans who make more than $400,000 or $450,000 per couple.
Separately, the new chairwoman of the Senate Budget Committee, Patty Murray, said Tuesday that any replacement for the automatic spending cuts should be phased in gradually to give the economy some breathing space.
"I believe our focus should be on jobs and the economy, not on arbitrary pain for American families," Murray said at a hearing of her committee.
Doug Elmendorf, director of the Congressional Budget Office, told the hearing that a delay of the fiscal tightening caused by the automatic budget cuts through December 31 would add about 0.6 percentage point to gross domestic product growth this year, which would allow an extra 750,000 jobs to be created.
CBO last week issued new forecasts that GDP growth would be held back to about 1.4 percent by the fourth quarter, with the unemployment rate ticking slightly higher, if the cuts were allowed to proceed.
(Additional reporting Thomas Ferraro, Phil Stewart and David Alexander; Editing by Fred Barbash and Steve Orlofsky)
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