US lawmakers on both sides show little room for negotiating way out of possibly devastating spending cuts that kicked in Friday
Billions of dollars in sequester-induced budget cuts appear set to stay for the time being, with leading political figures in Washington indicating no early resolution to the impasse, as they eye next year’s congressional elections.
John Boehner, the Republican speaker of the House of Representatives, said on Sunday he saw no path to agreement with the president over the $85bn in automatic cuts, about half to military spending, that kicked in on Friday after the two sides failed to agree a package of budget reductions and tax rises to tackle the deficit.
“I don’t think anyone quite understands how it gets resolved,” he said on NBC’s Meet the Press.
Pressed on why he does not agree to the president’s demand to increase revenues by closing tax loopholes, Boehner turned the question around and accused Barack Obama of failing to keep his side of the implicit bargain that higher taxes already agreed should be matched with spending cuts.
“The president got $650bn of higher taxes on the American people on January the first. How much more does he want? When is the president going to address the spending side of this?” said Boehner.
“You can’t tax our way out of this problem. We’ve got to deal with the spending side, just like every American family has to.”
Boehner said he made the same point at a “very frank” but polite meeting with the president on Friday.
Obama emerged from the encounter saying he saw little prospect of an agreement with Republicans in Congress in the near future. The president, apparently with one eye on the 2014 mid-term elections, predicted that it will take public opinion to shift the GOP.
“What I can’t do is force Congress to do the right thing,” he said after the meeting. “The American people may have the capacity to do that.”
Obama suggested that voters, sick of lurching from one financial crisis to another, will pressure their representatives.
“After some reflection, as members of Congress start hearing from constituents who are being negatively impacted … that they step back and say, all right, is there a way for us to move forward on a package of entitlement reforms, tax reform, not raising tax rates, identifying programmes that don’t work, coming up with a plan that’s comprehensive, and that makes sense,” he said.
“It’s going to mean hundreds of thousands of jobs lost. That is real. We’re not making that up. That’s not a scare tactic, that’s a fact.”
The president has said he did not know how long it will take for the cuts to shift the Republican position.
“It may take a couple of weeks. It may take a couple of months,” he said.
Gene Sperling, director of the White House National Economic Council, said Obama called a select group of Republican members of Congress on Saturday who may be more likely to consider “tax reform that raises revenues to lower the deficit”. The president also spoke to Democrats open to tackling entitlement spending long-term.
But the Republican leader in the Senate, Mitch McConnell, said his party will not be backing down and remains committed to $1.2tn in spending cuts over the next decade without increasing taxes.
“I’m absolutely confident we’re going to reduce spending the amount of money we promised the American people we would in a law the president signed a year and a half ago,” he told CNN.
“We said we’re open to discussing how to reconfigure those spending reductions without raising taxes … So far I haven’t heard a single Senate Republican say they would be willing to raise a dime in taxes to turn off the sequester.”
A report in the Washington Post on Sunday suggested that Obama had all but given up on attempts to push for bipartisan solutions to problems in Washington. Instead he was focusing on winning back the House in next year’s mid-term elections to force through his remaining agenda.
But McConnell said he does not think voters will be swayed against Republicans.
“The American people look at this and say: gee, I’ve had to cut my budget more than this – probably on numerous occasions over the last four years because we’ve had such a tepid economy now for four long years,” he said.
Boehner said he did not know what the long term effect of the sequester will be.
“I don’t know whether it’s going to hurt the economy or not. I don’t think anyone quite understands how the sequester is really going to work,” he said.
Still, the Republican leaders kept the door open to further negotiation at least on how the sequester cuts are distributed. They are keen to reduce the impact on the military and shift more of the burden to welfare spending which is already severely hit.
“We’re willing to talk to him (Obama) about reconfiguring the same amount of spending reduction over the next six months,” said McConnell.
Boehner said he did not think the spending crisis would reach the point of a government shutdown later this month, and that Congress will approve the funding to keep federal agencies open after March 27.
“We should not have any talk of a government shutdown so I’m hopeful that the House and Senate will be able to work through this,” he said.
US Secretary of State set to urge bickering leaders to end the political chaos that is blocking a large international loan
US Secretary of State John Kerry is calling on Egyptian leaders and opposition politicians to forge a political consensus that will allow the country to emerge from economic crisis. Kerry, who is on his first overseas trip as a member of Barack Obama’s cabinet, was scheduled to meet a number of opposition figures and Egypt’s foreign minister on Saturday. He will see President Mohammed Morsi on Sunday.
US officials said Kerry was particularly concerned that Egypt should make the reforms necessary to qualify for a $4.8bn International Monetary Fund loan package. One official said it was extremely important for the new Egypt for there to be a firm economic foundation, which required reaching agreement with the IMF. To get that Egypt must make reforms, like increasing tax collections and curbing energy subsidies.
Agreement with the IMF would also unlock significant US assistance, including portions of the $1bn that president Obama pledged last April. Getting the IMF deal will also be contingent on an end to the political chaos that has wracked the country since Morsi’s election. Kerry will press for all political players to come to a basic agreement on the country’s direction ahead of parliamentary elections that begin in April, the official said.
Liberal and secular Egyptians have complained that Washington is siding with Morsi’s ruling Muslim Brotherhood. The main opposition group, the National Salvation Front, has said it will boycott the upcoming elections. The US official said Kerry would not tell the front what to do, but would stress that they should participate if they want their ideas and values heard and represented. At the same time, the official said Kerry would impress on Morsi the need for inclusiveness and tolerance.
The visit by the US state secretary was marked by protest on Saturday. In Cairo’s Tahrir Square, a small group of anti-Morsi demonstrators held banners reading: “Kerry – member of the Brotherhood” and “Kerry, you are not welcome here”. The protests in the capital were largely peaceful. However, unrelated demonstrations Saturday in the Nile Delta city of Mansoura saw clashes in which at least one person died. Meanwhile in Port Said, a mob torched a police station, according to security sources.
Egypt has been locked in political crisis for months, amid waves of protests against Morsi that have repeatedly turned into deadly clashes and rioting. The opposition accuses the president and the Brotherhood, from which he hails, of dominating power in Egypt, effectively stepping in to the same role as the ousted autocrat Hosni Mubarak and failing to carry out reforms while seeking to instill a more religiously conservative system. Morsi’s administration and the Brotherhood say their opponents are trying to use street unrest to overturn their rule.
Kerry’s visit to Egypt is the sixth leg of a nine-nation dash through Europe and the Middle East. He will travel next to Saudi Arabia, the United Arab Emirates and Qatar.
Office of Management and Budget report outlines extent of $85bn cuts triggered by failure to reach deal by Friday deadline
The scale and reach of the sequestration spending cuts that will hit the US has been laid bare by government officials who warn that the order for the cuts, which was signed by president Barack Obama late Friday, would be “deeply destructive” to the economy and national security.
The Office of Management and Budget has compiled an official report on the breakdown of the $85bn cuts package, which was triggered by a failure to reach a broader political consensus on deficit reduction. The document reveals a detailed list of how the cuts will hurt spending at every level of government. It shows that research spending at the Department of Agriculture will be hit by $55m of cuts, while $150m will go from the immigration system at the Department of Homeland Security.
The long list of cuts includes relatively smaller sums – like $1m being lost for a dam project on the Colorado River and $6m cut from the Leaking Underground Storage Tank Trust Fund – to larger budgetary swipes, including $30m being removed from cultural exchange programs at the State Department. The Pentagon faces widespread cuts. It is losing some $2.6bn from its Defense Health Program and $3.4bn dollars from the navy’s operation and maintenance budget. The Army faces losing $4.6bn from its equivalent budget.
The OMB issued a stark analysis of the impact of the cuts in a letter to Congress that was issued with the report and signed by Jeffrey Zients, deputy director for management. “The cuts required by sequestration will be deeply destructive to national security, domestic investments and core government functions,” Zients wrote.
On Saturday, Obama warned of a “ripple effect” through the American economy that would cost hundreds of thousands of jobs. Obama said the sequestration was “not smart”. “The pain will be real,” he said in his weekly address. “Many middle-class families will have their lives disrupted in a significant way.”
He added that up to 750,000 jobs could be lost and a half per cent knocked off America’s economic growth this year. “This will cause a ripple effect across the economy. Businesses will suffer because customers will have less money to spend… These cuts are not smart. They will hurt our economy and cost us jobs.”
The sequester originates in a political crisis in 2011, when debates over deficit reduction almost saw the American government default on its debt payments. In order to avert that crisis Democrats and Republicans agreed that unless they struck a deal on shrinking the country’s debt, cuts would be made to federal spending. The idea was that the prospect of cuts to social services would motivate the Democrats and hurting military spending would do the same for Republicans.
Instead, despite Friday’s deadline no grand bargain was struck and the cuts – which neither side had intended to actually happen – are now coming into force. Over the next 10 years they will represent $1.2tn dollars of slashed spending.
The hardest hit part of the government will be the Pentagon, which must dig out some $40bn of cuts between now and September – about 9% of its budget. Defence chiefs have said that the move will delay deployments, such as a recent move of an aircraft carrier to the Persian Gulf, and hurt national security.
But almost every government department, from aviation to the parks service, will be hit, with cuts amounting to about 5% of overall budgets. Only Medicaid and welfare benefits such as food stamps are exempted. The Federal Aviation Authority has said that it will have to close scores of air traffic control towers and the National Labor Relations Boards has given staff 30 days of notice that they could be suspended from their jobs. Over the next few weeks more and more such letters will go out, threatening school services and the smooth running of scores of other government functions.
In his speech, Obama slammed Republicans as being to blame for inaction, saying that their hostility to any sort of extra tax revenues being generated from rich Americans was the root cause of the problem. In recent weeks, and since his victory over Republican challenger Mitt Romney in last year’s presidential election, Obama has not shied away from attacking his opponents as defenders only of the wealthy.
“It’s happening because Republicans in Congress chose this outcome over closing a single wasteful tax loophole that helps reduce the deficit. Just this week, they decided that protecting special-interest tax breaks for the well-off and well-connected is more important than protecting our military and middle-class families from these cuts,” Obama said.
But Republicans want only cuts, on welfare rather than defence, and have insisted on no new taxes. The Republican House speaker, John Boehner, pictured, was adamant at the end of the White House talks Friday that he would not contemplate any new taxes. “The discussion about revenue is over,” Boehner said. That hard line is popular with his party’s right-wing base but has left the party vulnerable to being attacked as being too entrenched in its ideology – especially after Obama’s resounding election victory.
In seeking to lay the blame for the sequester at the door of the Republicans, the Obama administration has run a carefully orchestrated image campaign aimed at focusing on the impact on middle-class American workers and their families. Obama continued that theme on Saturday, saying Republican leaders were out of touch with ordinary people and their own voters. “We just need Republicans in Congress to catch up with their own party and the rest of the country,” he said.
But on Saturday Republicans were still standing firm. In the party’s own weekly address, the congresswoman Cathy McMorris Rodgers attacked “out-of-control government spending” and said there was no point in new taxes, as the money would just be wasted. “Instead of campaigning for higher taxes, the president should lead an effort to begin addressing our nation’s spending problem,” Rodgers said.
But for many observers the fiasco of the sequestration – which has effectively meant both parties are implementing a policy that neither wants and each thinks is damaging – has left many complaining about a broader American political dysfunction. Yet the sequester is just one of several rolling crises that are threatening the smooth running of the world’s biggest economy that is still stuttering to recover from recession.
If Congress does not reach an agreement on a budget for this year by 27 March, the federal government faces the prospect of shutdown. Soon after that, Congress must approve an increase in the federal debt limit: the same move that two years ago created gridlock in Washington and resulted in the sequester. The House of the Representatives is due to vote next week on a deal to prevent a federal shutdown but there is a risk this could end up in a new stand-off between the Republican-controlled House and the Democratic-controlled Senate.
Follow live coverage as lawmakers give speeches ahead of scheduled across-the-board cuts, now less than 40 hours away
Originally posted here: Congress fails to act on sequester – as it happened
Bill extends the borrowing limit for more than three months, but a longer term solution still needed
The House of Representatives voted on Wednesday to extend the US’s borrowing limit for more than three months as the majority of Republicans backed down from their demands for more spending cuts.
The Republican-sponsored bill still needs a Senate vote and presidential approval but is likely to receive both. Democrats said they would approve the bill without changes shortly before the vote, which passed 285-144 with 86 Democrats voting for the bill to make up for the 33 Republicans who objected.
John Boehner, Republican House speaker, included a provision in the bill that will halt Washington lawmakers’ wages if a budget plan is not passed by April 15. “It’s real simple: no budget, no pay,” said Boehner.
Jay Carney, White House spokesman, called the vote a “welcome development” but said the president would prefer a longer term solution.
The compromise avoids an impending budget crisis that Treasury secretary Timothy Geithner warned would do “irreparable” harm to the US economy. Earlier this month Geithner wrote to Congress warning that the US was close to exhausting the measures put in place to extend its borrowing capacity. The government hit its $16.4tn limit on 31 December 2012. “It must be understood that the nation’s creditworthiness is not a bargaining chip or a hostage that can be taken to advance any political agenda,” warned Geithner.
While the vote addresses immediate concerns, the vote to push off debt ceiling decisions until 18 May will not halt upcoming spending cuts or impending clashes over government spending. On 1 March, $110bn in automatic spending cuts are set to take effect. And on 27 March, a stop-gap measure financing government operations expires.
Republican conservatives are preparing for a fresh battle a the end of March. House members including former vice-presidential hopeful Michelle Bachmann who voted against the bill voiced their concerns after the decision. “Giving the president four months of unlimited borrowing authority without a cap on spending is something I cannot support,” said Bachmann.
“I could not vote for a bill that added $4tn to our national debt over the next 10 years,” said Republican congressman Jimmy Duncan of Tennessee.
Senator Rand Paul, seen as a potential presidential candidate, sharply criticised his Republican colleagues in a speech in South Carolina earlier this week saying they had “retreated” in the face of opposition.
“I saw the speaker on TV handing the newly sworn-in president a flag. I am afraid it was the white flag of surrender,” he told the audience, Politico reported.