US cuts begin as compromise talks fail

US cuts begin as compromise talks fail

President Barack Obama reluctantly set in motion huge spending cuts that will hit the US military and an array of other programmes today, after he and Republican opponents failed to reach a compromise that would have blocked the $85bn move.

The cuts are designed to whittle away at America’s enormous debt, but could threaten its still-weak economy.

Both Mr Obama and the Republican leaders in the House of Representatives and Senate declared themselves still deadlocked after an 11th-hour White House meeting last night.

The two sides are at odds over the president’s insistence on increasing taxes as part of any plan for attacking the country’s $16.6 trillion indebtedness.

Mr Obama signed an order authorising the cuts, officially enacting the reductions. Under the law, he had until midnight.

He and the Republican leadership have been battling over that issue since the opposition party regained a majority in the House more than two years ago.

The crude, across-the-board budget cuts were conceived in 2011 to be so unattractive that both sides would be forced to find a better deal. But that has proved impossible despite two years to find a compromise.

The $85bn cuts apply to the remainder of the 2013 fiscal year, which ends on September 30. But the legislation that requires the reduction will continue slashing government spending by about one trillion dollars more over a 10-year period.

“Let’s be clear. None of this is necessary,” the president said after the White House meeting. “It’s a choice Republicans in Congress have made” to avoid to closing tax loopholes that benefit the wealthy.

He said “the pain will be real” for the American people, but added that the cuts were not “the apocalypse, they’re just dumb”.

Republican John Boehner, speaker of the House, walked out of the meeting to say there would be no compromise as long as Mr Obama insisted on higher tax revenue.

Republicans are standing fast against further increasing taxes and will not compromise on achieving debt reduction through spending cuts alone. The opposition party is still feeling the sting from its most conservative members after agreeing at the end of 2012 to allow the ending of Bush-era tax cuts for Americans earning $400,000 or more a year.

Last night’s meeting was the first the two sides have held this year on the budget battle – and it lasted less than an hour.

Asked whether he could not get the parties in a room and stay there until they reached a deal, Mr Obama said: “I can’t have Secret Service block the doorway.”

The cuts are just the first of a series of budget crises that will confront the US Congress and the White House in the coming weeks.

Next is a possible government shutdown. The annual ritual of passing agency spending bills collapsed entirely last year and congress must act by March 27 to prevent the partial shutdown.

Mr Obama and the Republicans indicated a willingness to find common ground on that issue. Mr Boehner said the House would pass legislation next week to extend routine funding for government agencies beyond the current March 27 expiration.

“I’m hopeful that we won’t have to deal with the threat of a government shutdown while we’re dealing with the sequester at the same time,” he said, referring to the new spending cuts by their Washington-speak name.

In May, congress will confront a renewed stand-off on increasing the government’s borrowing limit – the same issue that two years ago spawned the law forcing the current spending cuts in the first place.

Failure to raise the borrowing limit could force the US to default on debt for the first time in history.

The immediate impact of the spending cuts on the public was uncertain.

The Pentagon will absorb half of the $85bn required to be sliced between now and the end of the budget year on September 30, exposing civilian workers to lay-offs and defence contractors to possible cancellations.

Defence secretary Chuck Hagel, only a few days in the job, said: “We will continue to ensure America’s security” despite the challenge posed by an “unnecessary budget crisis”.

The administration has also warned of long queues at airports as security staff are laid off, teacher job losses and less maintenance at the nation’s parks. One military aircraft carrier’s tour of duty to the Persian Gulf has been delayed.

The president told reporters the effects of the cuts would be felt only gradually.

“The longer these cuts remain in place, the greater the damage to our economy - a slow grind that will intensify with each passing day,” Mr Obama said.

Much of the budget savings will come through unpaid leave for government workers, which will not begin taking effect until next month.

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