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Facing cuts, Obama, Republicans blame each other

(AP) / 21 February 2013

The still-weak US economy is just days away from taking a new fiscal body blow, with congressional Republicans and the White House more intent on blaming each other for the latest budget crisis than on negotiating a deal to avoid $85 billion in automatic government spending cuts.

The looming cuts, which would initially affect government spending between March 1 and the Sept. 30 end of the federal fiscal year, were enacted to overcome a budgeting standoff two years ago and were designed to be so distasteful to the core interests of both Republicans and Democrats that they would force more targeted reductions. The effects of the maneuver — known as the sequester — will stretch on for a decade, slashing nearly $1 trillion more out of federal spending.

The sequester battle is just the latest in a series of fiscal fights since Republicans retook control of the House of Representatives in 2010, determined to blunt President Barack Obama’s legislative agenda, shrink the size of government, cut spending and lower taxes. Last-minute bargaining has so far averted dramatic outcomes like the shutdown of government for lack of funding or a US default on its loan payments because Congress denied the government’s need to increase its borrowing limit.

But with no deal in sight this time, the bitter budget cuts look likely to take effect. Congress is not even returning to session until Monday, four days before the March 1 deadline to reach a compromise. The cuts will be draconian, hitting the military, education, research and development, and even core security agencies including the FBI, the Coast Guard and border patrols.

Obama called it a ‘meat cleaver’ approach to debt reduction.

At issue is a spiraling national debt that has surpassed $16 trillion, pushed to that extraordinary level by declining tax revenue and the vast sums of money that Obama pumped into the economy after taking office during the worst economic downturn since the Great Depression of the 1930s. The national debt had already doubled during President George W. Bush’s eight years at the White House and was about $10.6 trillion when he left office in 2009.

The sequester, as dangerous as it may be for the US economy and its slow recovery from the Great Recession, is only one symptom of the partisan divide crippling American politics. The ideological gap grew more acute with the ascent of the conservative tea party movement that propelled Republicans to retake the House in 2010. After that election, Republicans were able to stymie most of Obama’s legislative agenda.

The president has seemed determined to break out of that legislative box since his convincing re-election in November elections, which also saw his fellow Democrats gain seats in the House and widen their majority in the Senate. With talks on a sequester compromise non-existent, Obama has turned to campaign-style exhortations directed at voters, hoping to pressure recalcitrant Republicans to give ground.

Obama campaigned for re-election on promises to make the economy fairer, restore opportunity for the middle class and raise taxes on the wealthiest. He won a partial victory in December when Republicans, divided and unable to rally behind an alternative plan put forward by House Speaker John Boehner, agreed to allow Bush-era tax cuts to expire for Americans earning more than $400,000 a year. Obama had initially pushed for the taxes to expire for those making more than $200,000 a year.

Now the president, pushing a hard bargain over the sequester, wants to further raise taxes on certain wealthy individuals and corporations by eliminating loopholes that allowed them to vastly reduce reported income.

‘So now Republicans in Congress face a simple choice,’ Obama said Tuesday. ‘Are they willing to compromise to protect vital investments in education and health care and national security and all the jobs that depend on them? Or would they rather put hundreds of thousands of jobs and our entire economy at risk just to protect a few special-interest tax loopholes that benefit only the wealthiest Americans and biggest corporations?’

Answering Obama for the Republicans, Boehner shot back: ‘The president offered no credible plan that can pass Congress — only more calls for higher taxes. He said Obama’s desire for more tax revenue is a dead issue.

The sequester law exempts the federal Social Security pension program, Medicaid health care and food stamps for the poor and Medicare health insurance available to Americans at age 65.

Most other government programs are vulnerable, including a big slice of the defence budget. The Defense Department has warned Congress the coming spending cuts will force it to begin furloughs for 800,000 civilian workers. The Pentagon has also announced the cuts are forcing the withdrawal one of its two aircraft carriers from the Arabian Gulf region, while the Navy’s Pacific operations will be slashed by one-third.

In other areas, furloughed food inspectors would force nationwide closures of meat and poultry plants, ten thousand teachers would be laid off and relief funds for disaster victims face a $1 billion reduction.

The effects of the cuts would not happen all at once. But even the most optimistic assessments say the sequester would cut at least a half percentage point off economic growth and add a quarter point to already high unemployment of about 8 percent.

Despite the bleak picture, there appears to be little appetite for a deal. Conservative Republicans, stung by the tax concessions their party made during the last fiscal crisis negotiations, insist they are willing to live with the automatic cuts this time around. Boehner, the House Speaker, looks ready to stand with them as Obama steadfastly insists on raising tax revenues while protecting a broad range of government programs.

 
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