Republicans and Biden meet amid budget pressure

Reuters News
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Posted: Mar 21, 2011 2:53 PM
Republicans and Biden meet amid budget pressure

By Richard Cowan and Thomas Ferraro

WASHINGTON (Reuters) - Vice President Joe Biden held budget talks with congressional leaders on Thursday as Republicans came under pressure to scale back their plan to slash domestic spending by 25 percent.

President Barack Obama and his fellow Democrats are at odds with Republicans over how to shrink the budget deficit, which is due to reach a record $1.65 trillion this year, and keep the federal government running through September.

A temporary funding bill expires on March 18.

"We had a good meeting, and the conversation will continue," Biden said in a statement after the closed-door, one-hour talk on Capitol Hill with top Republican and Democratic leaders.

Republicans propose cutting spending by $61 billion through September. But Obama, many Americans and a financial titan highly respected on Wall Street say that is too much.

Biden, who helped negotiate a tax-cut deal with Congress in December, met with leaders including Republican House of Representatives Speaker John Boehner and Democratic Senate Majority Leader Harry Reid.

"We are willing to cut spending further if we can find common ground," said White House National Economic Council Director Gene Sperling.

A source at the meeting said Obama administration officials outlined a host of specific programs that could be cut to reach $6.5 billion in cuts from current levels.

The cuts range from $950 million in funds for states for clean water and drinking water projects; $100 million from a biomass crop assistance program; and $280 million related to a canceled train tunnel between New Jersey and New York.

"DO IT GRADUALLY"

A top official at the world's biggest bond fund manager called for measured austerity measures to avoid harming the economy.

"Let's cut the deficit, but let's do it gradually," Bill Gross, PIMCO's co-chief investment officer, told Reuters Insider. PIMCO is the world's biggest bond fund manager.

In an interview with the Wall Street Journal, Boehner said House Republicans would offer a budget for the next fiscal year that sets goals for bringing under control the costs of the Social Security retirement program and the Medicare health insurance program for the elderly and disabled.

Boehner told the Journal that he told Obama he would work with the president to rein in spending on the huge entitlement programs. Boehner criticized Obama for not proposing a plan to overhaul the programs, telling the Journal: "I think the president shrank from his responsibility to lead. He knows the numbers as well as we do."

Republicans showed little willingness to soften their proposals for spending cuts.

"I don't think compromise right now is the option," said Representative Scott DesJarlais, one of the 85 first-term House Republicans elected last fall on the strength of a conservative groundswell. "We were sent here to cut spending."

Congress avoided a government shutdown by approving a short-term spending bill this week but major disagreements remain. Both parties acknowledge the need this year to cut the deficit, projected to equal 10.9 percent of the economy.

But Democrats argue that reducing government spending too much would hurt the shaky economic recovery and result in hundreds of thousands of job losses at a time when unemployment stands at 9 percent.

Democrats who control the Senate are preparing a measure that would keep funding essentially flat.

Many political observers said Boehner won the initial round of the budget debate when lawmakers agreed on Wednesday to a two-week budget extension that included $4 billion in relatively noncontroversial cuts.

But even as he harnesses the budget-cutting enthusiasm of the conservative Tea Party activists, he risks alienating the broader public. A poll released on Thursday found that most Americans do not share the passion for deep spending cuts.

The Wall Street Journal/NBC News poll found that more than half of those surveyed fear Republicans would cut spending too deeply, while 70 percent of Tea Party backers worry they would not go far enough.

The administration says beyond the $6 billion in cuts from current levels it is also proposing cuts totaling $44.8 billion already contained in bills to keep funding the government.

Although Democrats are pitching the $44.8 billion as a spending cut, it is essentially keeping spending flat as the base for comparison is not current spending levels but spending Obama sought last year in a budget that was never enacted.

If lawmakers are unable to reach a deal by March 18, Republicans will put forward another stopgap spending measure that cuts $2 billion per week, said House Republican Leader Eric Cantor.

(Writing by Andy Sullivan; additional reporting by Alister Bull and Jeff Mason; editing by Todd Eastham)