Bloomberg News

Reid Says Congress Has Time to Pass Budget Deal This Year

December 11, 2012

Congress still has time to enact a budget plan before the Christmas holiday although it won’t be easy, Senate Majority Leader Harry Reid said today.

“I think it’s going to be extremely difficult to get it done before Christmas, but it could be done,” Reid, a Nevada Democrat, told reporters today in Washington. If Congress doesn’t act, more than $600 billion in tax increases and spending cuts will start taking effect Jan. 1.

Reid spoke a few hours after House Speaker John Boehner reiterated his call for President Barack Obama to offer proposed spending cuts as part of a deficit-reduction package.

“Where are the president’s spending cuts?” Boehner, the Ohio Republican, said on the House floor. He said he is still “hopeful” the parties can reach a budget agreement before the end of the year.

“The longer the White House slow-walks this process, the closer” the economy gets to the so-called fiscal cliff of tax increases and spending cuts set to begin in January, the speaker said in his first public comments since meeting with Obama Dec. 9.

“Right now the American people have to be scratching their heads and wondering: When is the president going to get serious?” Boehner said.

White House spokesman Jay Carney disputed Boehner’s contention that the White House hasn’t offered specific spending cuts, holding up a 67-page report released by the administration Sept. 19, 2011, on proposals to cut the deficit. Those plans were included in the budget Obama sent to Congress earlier this year.

‘Lot of Specificity’

“There’s a lot of specificity in there,” Carney told reporters at his daily briefing. “We have not seen anything like that kind of specificity from Republicans.”

He refused to provide any details about what negotiators were talking about or whether the White House team was making new or different proposals.

Talks remain deadlocked because administration negotiators have taken much different positions than what Obama outlined to Boehner on how much revenue to raise and the amounts of spending cuts, said congressional aides who weren’t authorized to discuss the negotiations publicly.

The perception of the state of the talks is different in the Senate. A Senate Democratic aide disputed the notion that talks had broken down over Obama’s negotiators taking different positions, saying that the issue remained Republicans’ refusal to budge on tax rates. The aide spoke on condition of anonymity because the talks are private.

All Income Levels

If Congress doesn’t act, tax rates for income at all levels would rise, along with taxes on estates, capital gains and dividends.

The Congressional Budget Office has said if nothing changes, the stalemate probably would lead to a recession in the first half of 2013. Obama and Boehner are trying to replace the immediate deficit reduction with more gradual tax and spending changes.

In response to Boehner, House Minority Leader Nancy Pelosi pointed to more than $1 trillion of cuts already passed, including those in the 2011 law that raised the debt limit.

“Where are the cuts?” said Pelosi, a California Democrat. “They’re in bills, Mr. Speaker, that you’ve voted for.”

Stocks rose, as the Standard & Poor’s 500 Index climbed 0.9 percent to 1,431.59 at 2:09 p.m. in New York. The Dow Jones Industrial Average gained 109.32 points, or 0.8 percent, to 13,279.20. The benchmark Treasury 10-year note yield increased three basis points to 1.65 percent. It touched 1.66 percent earlier, the highest level since Nov. 27.

CEOs’ Letter

More than 150 chief executive officers, including JPMorgan Chase & Co. (JPM:US)’s Jamie Dimon and Goldman Sachs Group Inc. (GS:US)’s Lloyd Blankfein called on Obama and Boehner to compromise on a budget deal that would include new tax revenue and spending cuts.

Without a “principled compromise” soon, the chief executives warned in a letter today, the U.S. will suffer “long-lasting, if not permanent” economic damage.

“Compromise will require Congress to agree on more revenue -- whether by increasing rates, eliminating deductions or some combination thereof -- and the administration to agree to larger, meaningful structural and benefit entitlement reforms and spending reductions that are a fiscally responsible multiple of increased revenues,” said the CEOs, all members of the Business Roundtable, a Washington-based association.

While private talks continue between the administration and aides to Boehner, each side has been insisting publicly that the other must give in first.

“We’re basically running out of time,” said Senate Minority Leader Mitch McConnell, a Kentucky Republican. “We’re going to find out whether the president actually agrees with us on cutting any government spending whatsoever.”

To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net; Roxana Tiron in Washington at rtiron@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net


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