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Obama presses Congress for deal to end U.S. spending cuts

by FP Staff  Mar 2, 2013 18:00 IST

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WASHINGTON (Reuters) - Just hours after across-the-board spending cuts officially took effect, President Barack Obama pressed Congress on Saturday to work with him on a compromise to halt a fiscal crisis he said was starting to "inflict pain" on communities across the United States.

Obama and a bipartisan group of congressional leaders failed on Friday to avoid the deep spending reductions known as the "sequester," which automatically kicked in overnight in the latest sign of dysfunction in a divided Washington.

If left in place without legislative remedy, government agencies will have to hack a total of $85 billion from their budgets between Saturday and October 1, cuts that over time could cause economic harm, slash jobs and curb military readiness.

"These cuts are not smart," Obama said in his weekly radio and Internet address. "They will hurt our economy and cost us jobs. And Congress can turn them off at any time - as soon as both sides are willing to compromise."

Obama signed an order on Friday night that started putting the cuts into effect.

At the heart of Washington's persistent fiscal showdowns is disagreement over how to slash the budget deficit and the $16 trillion national debt, bloated over the years by wars in Iraq and Afghanistan and government stimulus for the ailing economy.

The Democratic president wants to close the fiscal gap with spending cuts and tax hikes - what he calls a "balanced approach." But Republicans do not want to concede again on taxes after doing so in negotiations over the "fiscal cliff" at the New Year.

"The discussion about revenue, in my view, is over. It's about taking on the spending problem," John Boehner, the Republican House of Representatives speaker, said on leaving the talks between Obama and congressional leaders on Friday.

As Obama and his aides have done for weeks, the president in his radio address offered a litany of hardships he said would flow from the sequester, saying, "Severe budget cuts ... have already started to inflict pain on communities across the country."

"Beginning this week, businesses that work with the military will have to lay folks off. Communities near military bases will take a serious blow. Hundreds of thousands of Americans who serve their country - Border Patrol agents, FBI agents, civilians who work for the Defense Department - will see their wages cut and their hours reduced," he said.

"The longer these cuts remain in place, the greater the damage," he said. "Economists estimate they could eventually cost us more than 750,000 jobs and slow our economy by over one-half of one percent." Despite that, financial markets shrugged off the stalemate on Friday.

NO SIGNS OF NEGOTIATIONS

While Obama has put the blame for the cuts on Republicans' intransigence and their determination to protect tax breaks for the wealthy, Republicans insist he is responsible for the fiscal predicament. They also accuse him of exaggerating the expected impact.

Obama appealed for Republicans to work with Democrats on a deal, saying Americans were weary of seeing Washington "careen from one manufactured crisis to another." But he offered no new ideas to resolve the situation, and there was no immediate sign of any negotiations planned over the weekend.

"There's a caucus of common sense (in Congress)," Obama said. "And I'm going to keep reaching out to them to fix this for good."

One reason for the inaction in Washington is that both parties still hope the other will either be blamed by voters for the cuts or cave in before the worst effects predicted by Democrats come into effect.

A Reuters/Ipsos poll released on Friday showed 28 percent of Americans blamed congressional Republicans for the sequestration mess, 18 percent thought Obama was responsible and 4 percent blamed congressional Democrats. Thirty-seven percent blamed them all, according the online poll. (Editing by Peter Cooney)