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Analysis: Federal Cuts Unlikely To Be Addressed Before November

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Government contractors in the D.C. area are eagerly awaiting news from Capitol Hill about federal spending cuts set to take effect at the start of next year. Without some kind of intervention, there would be deep, across-the-board cuts come January. Alex Bolton, senior staff writer for The Hill newspaper, talks with WAMU 88.5 All Things Considered host Pay Brogan about reports of progress in discussions to avert those cuts.

What are you hearing from lawmakers today?

"Sen. Lindsay Graham (R-SC) told reporters this afternoon that there are discussions between him, John McCain, and Sen. Carl Levin, the Democratic chairman of the Armed Services committee in the Senate, to put together a deal to avert the cuts to defense spending. What he said is that Republicans are looking at including tax increases and new federal fees. Specifically, he's talking about closing tax loopholes, which aren't specified as of yet, but it would raise $40 to $50 billion in new revenue. That's very important, because Democrats say that's necessary for getting any sort of a deal to wipe out the $55 billion in scheduled cuts to defense next year. So the ratio of spending cuts to tax increases would be 3 to 1. That's roughly along the lines of the Bowles-Simpson plan. Graham and McCain think that sort of ratio can get support amongst Republicans."

Do you have any sense of a timeline on when an agreement could be reached?

"Probably not until after the election, just because things are so partisan right now. We have moved into messaging time. Democrats in the Senate have scheduled votes on various tax issues that are designed to carry the Democratic message and put pressure on Republicans. For instance, in the next couple weeks, there is going to be a vote on extending the Bush era tax cuts for families earning under $250,000. It would put pressure on Republicans to vote against a middle class tax extension, because the Republicans think the wealthy should be included as well. There will be other political votes this month, so as far as any substantive progress on this deal, we probably won't see it for another few months."

"But what's interesting today is that several of the Republicans on the Senate Armed Services committee said they would be willing to consider a deal that would include increases in tax revenue. That includes Kelly Ayotte from New Hampshire and Susan Collins from Maine."

This week, President Barack Obama is preparing to let the Bush-era tax cuts expire for those who make more than $250,000. That's put him at odds with some Virginia Democrats. How are they responding?

"Tim Kaine, the former governor of Virginia, who is running for Jim Webb's Senate seat, said he would prefer the threshhold be drawn at $500,000. Webb has been adamant about sticking to his position that taxes shouldn't be raised on any ordinary income. He says if you want to raise tax revenues, you should increase the rates on capital gains or investment income. So Obama is at odds with two prominent Democrats in Virginia."

"Mark Warner has been a little circumspect in his position. He's trying to get a grand bargain to reduce the deficit that would include significant tax reform."

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