February 3, 2011 / 4:58 PM / 7 years ago

UPDATE 2-US House Republicans seek $32 bln in spending cuts

* Proposal is a warm-up to bigger fight over 2012 budget

* Bernanke urges action on raising U.S. debt limit

(New throughout, adds byline)

By Richard Cowan

WASHINGTON, Feb 3 (Reuters) - Republican leaders in the U.S. House of Representatives will seek $32 billion in spending cuts this year as part of an initial bid to shrink record U.S. budget deficits forecast to hit $1.5 trillion this year alone.

Aides to House Budget Committee Chairman Paul Ryan on Thursday outlined the savings that would become part of a bill to fund a range of federal programs through the current fiscal year that ends on Sept. 30.

The legislation is a warm-up to a much bigger fight over spending priorities -- and possibly tax policy -- that will intensify on Feb. 14 when President Barack Obama submits his fiscal 2012 budget proposal to Congress.

Meanwhile, Federal Reserve Chairman Ben Bernanke, backing up recent calls by Treasury Secretary Timothy Geithner, urged Congress to pass legislation raising the U.S. debt limit, which will soon breach its $14.3 trillion ceiling. [ID:nN0354501]

Citing the possibility of “catastrophic” implications from inaction, Bernanke told the National Press Club, “I would very much urge Congress not to focus on the debt limit as being the bargaining chip” in a fight over spending and tax policy, as some Republicans have urged.

Some of Obama’s fellow Democrats in Congress, as well as some Republicans, are urging Obama to host a summit to work out a long-term fix to get record budget deficits under control.

“What needs to be done is a multiyear comprehensive plan that reduces the debt on the order of $4 trillion,” Senate Budget Committee Chairman Kent Conrad, a Democrat, told reporters.


Any such fix could require painful cuts that Democrats have been resisting to retirees’ Social Security and government-backed healthcare programs. It also could require tax increases that Republicans oppose.

Federal programs currently are operating on stop-gap funding that will run out on March 4. The House is aiming to pass the new spending plan the week of Feb. 14.

The House Appropriations Committee still must fill in the details of how the spending cuts would be carried out and the Democratic-led Senate will consider its own plan, setting the stage for a bitter battle over spending and debt that some lawmakers fear could lead to a government shutdown.

Ryan’s spending cuts would fall mainly on domestic programs other than domestic security protections and benefits for war veterans, according to the aides, who asked not to be identified.

While the aides said small savings would be found in some defense and national security programs proposed by Obama last year, spending in those areas would rise slightly under Ryan’s plan compared to current levels.

Domestic non-security spending would fall to about $420 billion this year, from around $461 billion under current levels, his aides said.

While it will be up to the House Appropriations Committee to come up with specific spending cuts within the overall level, Ryan’s aides said environmental programs had expanded in recent years and could be an example of a target for cuts.

Education, law enforcement and a range of other programs could be cut too, they said.

Democrats have countered that cutting spending too much too fast could threaten the economic recovery.

Ryan’s aides said compared to Obama’s budget request for fiscal year 2011, the Republican plan would save $74 billion.

In their 2010 congressional campaigns, Republicans pledged to cut $100 billion from Obama’s request and to set domestic discretionary spending back to 2008 levels -- before massive government bailouts and spending measures were instituted to help rescue an economy plunging into a deep recession.

Republican leaders have said with five months of the current fiscal year already gone, it was difficult to achieve the full $100 billion in savings they had promised.

Many rank-and-file Republicans have been urging more ambitious spending cuts than Ryan produced. Once the legislation hits the House floor, they are expected to offer amendments for deeper cuts in domestic spending. (Additional reporting by Donna Smith; Editing by Vicki Allen)

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