Parties trade spending cuts blame in the US

The White House and Republican congressional leaders offered no meaningful proposals for rolling back automatic spending cuts that will slash €64bn from the national budget.

Parties trade spending cuts blame in the US

The White House and Republican congressional leaders offered no meaningful proposals for rolling back automatic spending cuts that will slash €64bn from the national budget.

Each side blamed the other for the across-the-board spending cuts that took effect on Friday, but gave little guidance on what to expect in the coming weeks.

Republicans and Democrats pledged to retroactively undo the cuts but gave no hints on how that process would start to take shape. Republicans insisted there would be no new taxes and Democrats refused to talk about any bargain without them.

US president Barack Obama and the Republicans have been fighting over national spending since the opposition party regained control of the House of Representatives in the 2010 mid-term elections.

The sequester – the term used in Washington for the automatic spending cuts - was designed in 2011 to be so ruthless that both sides would be forced to find a better deal, but they have not, despite having two years to find a compromise.

The 85 billion-dollar cuts apply to the remainder of the 2013 fiscal year, which ends on September 30. But without a deal they will continue slashing government spending by about one trillion dollars (£660bn) more over a 10-year period.

The public posturing by both sides on television news programmes yesterday indicated that the spending cuts were there to stay for the near future.

Senate Republican leader Mitch McConnell called them modest, Republican House of Representatives speaker John Boehner is not sure the cuts will hurt the economy and the White House’s top economic adviser Gene Sperling said the pain was not that bad right now.

Mr McConnell, the Senate’s minority leader, said the automatic cuts just starting to kick in were a step towards curing Washington of its “spending addiction”.

“This modest reduction of 2.4% in spending over the next six months is a little more than the average American experienced just two months ago, when their own pay went down when the payroll tax holiday expired,” he said.

The payroll tax reduction was a temporary measure intended to stimulate the economy.

Mr Boehner downplayed the dire warnings issued by President Obama and cabinet members about the impact of the spending cuts.

“I don’t know whether it’s going to hurt the economy or not,” he said. “I don’t think anyone quite understands how the sequester is really going to work.”

Mr Sperling downplayed the immediate impact of the cuts, but warned that their impact would grow in the months ahead.

“On day one, it will not be as harmful as it will be over time,” he said.

Republicans insisted there would be no new revenue from taxes.

“That’s not going to work,” said Senator Kelly Ayotte. “If we’re going to increase revenue again, it’s got to go to the debt with real entitlement reform and real tax reform when you actually lower rates. ... I’m not going to agree to any more tax increases that are going to go to increase more government.”

All of this comes ahead of the next major budget hurdles, with less than a month to negotiate a funding plan to avert a government shutdown after March 27.

If the parties can manage to avoid a shutdown, yet another fiscal fight looms. In May, Congress will confront a renewed stand-off on increasing the government’s borrowing limit – the same debt-ceiling 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.

Mr Boehner said the Republican-controlled House would move this week to pass a measure to keep government open until September 30.

McConnell said a government shutdown was unlikely to come from his side of Capitol Hill and the White House said it would dodge the shutdown and roll back the cuts, which hit domestic and defence spending in equal share.

“We will still be committed to trying to find Republicans and Democrats that will work on a bipartisan compromise to get rid of the sequester,” Mr Sperling said.

Senate Democrats and Senate Republicans last week put forward alternative measures that would have avoided the cuts, but each side voted down the others’ proposals. The House Democrats proposed an alternative but the House Republicans did not let them vote on it.

Mr Obama has phoned politicians but it was not clear to what end. The White House refused to release the names of those he phoned and Mr Boehner and Mr McConnell said they had a productive meeting with the president on Friday, but it did not yield a deal.

Mr Obama said the automatic budget cuts were not necessary and blamed the Republicans for refusing to compromise.

“It’s happening because Republicans in Congress chose this outcome over closing a single wasteful tax loophole that helps reduce the deficit,” he said in his weekly radio and internet address on Saturday.

The president said the cuts would cause “a ripple effect across the economy” that would worsen the longer they stayed in place, eventually costing more than 750,000 jobs and disrupting the lives of middle-class families.

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