Sen. Reid Sees Nation Headed Over Fiscal Cliff as Time Running Out

Thursday, 27 Dec 2012 10:42 AM

 

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Senate Majority Leader Harry Reid said the U.S. budget dispute probably won’t be resolved before Jan. 1 because Republicans won’t cooperate.

“I don’t know time-wise how it can happen now,” Reid, a Nevada Democrat, said on the Senate floor Thursday in Washington. He blamed House Speaker John Boehner and Senate Minority Leader Mitch McConnell, both Republicans.

“Democrats can’t put together a plan on their own because without participation of Leader McConnell and Speaker Boehner nothing can happen on the fiscal cliff. And so far, they are radio silent,” he said.

The two sides are locked in a stalemate as they try to prevent more than $600 billion in tax increases and spending cuts for 2013 scheduled to start taking effect in January. Each party is blaming the other for inaction.

Democrats, who control the Senate, say the House must back an extension of expiring tax cuts on income of married couples up to $250,000. The Republicans who control the House say it’s the Senate’s turn to act.

If Congress does nothing, taxes will go up in 2013 by an average of $3,446 for U.S. households, according to the nonpartisan Tax Policy Center in Washington. Tax filing for up to two-thirds of Americans could be delayed into at least late March. Defense spending would be cut, and the economy would probably enter a recession in the first half of 2013, according to the Congressional Budget Office.

Obama Discussions

President Barack Obama spoke Wednesday with Reid, Boehner of Ohio, McConnell of Kentucky, and House Minority Leader Nancy Pelosi, a California Democrat, to receive an update on the negotiations, said Amy Brundage, a White House spokeswoman. Obama returned to Washington from Hawaii.

The Senate has a vote on an unrelated issue scheduled for today. House members aren’t in Washington; Republicans are scheduled to hold a conference call later today.

“We are here in Washington working while the members of the House of Representatives are out watching movies and watching their kids play soccer and basketball and do all kinds of things,” Reid said.

Boehner spokesman Brendan Buck said in a message posted today on Twitter that the speaker “told the president yesterday that the Senate must now act. The House has already done so to avert the entire fiscal cliff.”

House Bills

The House passed a bill in August that would extend the expiring tax cuts for all income levels, and another bill Dec. 20 to replace the automatic spending cuts with other reductions. The House hasn’t addressed some expiring provisions, including a scheduled pay cut to doctors under Medicare and expanded unemployment insurance.

Don Stewart, a McConnell spokesman, said in an e-mail that the minority leader “is happy to review what the president has in mind, but to date, the Senate Democrat majority has not put forward a plan.”

“When they do, members on both sides of the aisle will review the legislation and make decisions on how best to proceed,” Stewart said.

Stocks fell and bonds rose. The Standard & Poor’s 500 Index dropped 0.7 percent to 1,409.26 at 11:30 a.m. in New York. The Dow Jones Industrial Average lost 81.38 points, or 0.6 percent, to 13,033.21 today. Consumer confidence also declined more than forecast.

The benchmark 10-year note yield fell three basis points, or 0.03 percentage point, to 1.72 percent at 11:23 a.m. in New York, according to Bloomberg Bond Trader prices.

Individual Income

Reid urged Boehner to allow a vote on a bill the Senate passed in July that would extend income tax cuts for one year for individual income up to $200,000 and income of married couples up to $250,000. Reid said House Democrats and some Republicans would join to pass such a plan.

The House is “being operated with a dictatorship of the speaker, not allowing the vast majority of the House of Representatives to get what they want,” Reid said.

That Senate-passed bill has complications. The Constitution requires tax measures to be originated in the House, and this measure started in the Senate. It also doesn’t address the automatic spending cuts, unemployment benefits, the estate tax and a number of other issues with Dec. 31 deadlines.

The U.S. will reach the $16.4 trillion debt limit Dec. 31, Treasury Secretary Timothy F. Geithner said Wednesday. Treasury can take so-called extraordinary measures to finance about $200 billion in deficits in 2013.

Typically, that would be enough for two months. Geithner didn’t set a specific deadline because of the lack of certainty about tax rates and spending.

The Senate bill is S. 3412. The House bills are H.R. 8 and H.R. 6684.

© Copyright 2014 Bloomberg News. All rights reserved.

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