The Daily Item, Sunbury, PA

March 2, 2013

Federal spending cuts arrive with no end in sight

By Zachary A. Goldfarb

The Washington Post

WASHINGTON — President Barack Obama on Friday acknowledged that deep federal budget cuts are here with no end in sight, an outcome that he warned would harm the economy but said he lacked the power to stop.

A final attempt to find common ground with congressional leaders at a White House meeting proved fruitless. The president continued to press for higher taxes as part of a deal and Republicans continued to refuse — clearing the way for $85 billion in cuts this fiscal year and $1.2 trillion over the next decade.

The reductions, which Obama was set to formally enact late Friday, are likely to remain in place for the foreseeable future. There had been speculation that they might be adjusted later this month when lawmakers must agree on a new deal to fund the government or risk a shutdown. But Obama made clear Friday that he would seek to avoid a shutdown even if that means allowing the across-the-board cuts, known as the sequester, to continue.

The failure to reach a deal to turn off the sequester after years of clashes over spending and taxes will usher in an era of deeper austerity in the United States. To date, the country has resisted the sharp pullback in federal spending that has been more common in Europe.

The onset of the sequester will also introduce a new level of uncertainty for Americans who rely on the government for employment or services, with an outsize impact in the Washington region.

For Obama, the failure to reach a deal is a setback. He has spent years arguing that efforts to tame the nation's debt should involve a balance of spending cuts and tax revenues. As things stand now, the onset of the sequester means that balance tilts heavily toward cuts.

Polls shows Obama has broad support among Americans for his approach to taxes and spending. Over coming weeks, senior administration officials said, he will highlight people and localities hurt by the sequester. The hope is that pressure will eventually force Republicans to concede, but the president said that could take months.

"It's happening because of a choice that Republicans in Congress have made," Obama said in the White House briefing room, after the meeting with congressional leaders broke up. "They've allowed these cuts to happen because they refuse to budge on closing a single wasteful loophole to help reduce the deficit."

But for now, the GOP is able to say it defied the president, avoiding his demand for new tax revenue. The standof comes after deep intraparty divisions nearly tore House Republicans apart late last year in battles about whether to support tax hikes.

Republicans can say they have forced greater restraint in government spending — although it is far from the arrangement most GOP leaders wanted. Republican leaders have warned that the sequester could damage national defense and expressed frustration that it does not apply to social programs such as Medicaid and Social Security.

Nonetheless, they say the cuts are preferable to tax hikes.

"Let's make it clear that the president got his tax hikes on January 1st," House Speaker John Boehner, R-Ohio, said outside the White House, referring to new taxes on the wealthy approved in January. "This discussion about revenue in my view is over. It's about taking on the spending problem here in Washington."

The coming months will be a test of both sides' strategy. Obama and his aides have associated the sequester with a the litany of horrors, from hundreds of thousands of job losses to steep pay cuts for border patrol agents and the Pentagon's 900,000 civilian employees.

"Not everyone will feel the pain of these cuts right away," Obama said. "The pain, though, will be real."

But some Republicans have suggested that Obama has more flexibility that he is letting on, and that many Americans might not notice the impact of the sequester.

The stock market was unfazed, ending Friday flirting with record highs. Independent economists say the cuts are likely to slow growth and cost jobs, but the magnitude is less than in previous budget crises, such as the 2011 debt-limit battle.

The across-the-board cuts in the sequester fall on the Defense Department and domestic agencies. Some major safety-net programs, including Medicaid and food stamps, are exempt. The president and Congress created it in 2011 to force themselves to find smarter ways to reduce the deficit.

To replace the sequester Obama demanded additional tax revenue this year as well as alternative cuts. Republicans declined to offer any new revenue.

The White House has been preoccupied with budget battles for over two years, but Obama signaled on Friday a desire to move beyond the issue to pursue other priorities such as immigration and gun control.

"The conversations that are taking place on a bipartisan basis around immigration reform are moving forward," Obama said. "What I'm going to keep on trying to do is to make sure that we push on those things that are important to families," he said. We won't get everything done all at once, but we can get a lot done."

Still, several major fiscal issues will linger. Republicans and Obama signaled a willingness Friday to continue to fund the government at sequester levels when a current stopgap measure expires on March 27. "There's no reason why we should have another crisis by shutting the government down," Obama said.

Republicans next week plan to put forward a bill that would keep the government open past March, but fund it at the lower levels of sequestration.

But the truce could be upended if a group of conservatives get their way. Some conservatives are pressuring lawmakers to to defund Obama's health-care overhaul, an obvious red line for the White House.

Other looming potential battles include the need to raise the federal debt ceiling by mid-summer and the need for a way to fund the government past the end of the fiscal year on Sept. 30.

"This is not a win for anybody," Obama said of the sequester. "This is a loss for the American people."

The short-term impact of the cuts started to emerge across the country Friday as officials prepared for their enactment. Governors received letters from top administration officials warning about how their states would be affected by the cuts.

The Pentagon's two top officials held a news conference reiterating that budget reductions of $46 billion this fiscal year could have lasting damage on military readiness. Secretary of Defense Chuck Hagel said he was particularly worried about the toll the cuts will take on the workforce of the country's largest bureaucracy.

"Our number one concern are our people," he said. "I know these budget cuts will cause pain."

Katie Savant, 35, wife of a Marine artillery captain stationed at 29 Palms in San Bernadino, Calif., said that like many of the military wives she socializes with, she is unsure and worried about the sequester's impact. There's lots of "speculation and rumors" flying around the base. "The uncertainty of it all adds this extra level of stress."

In the Texas border town of El Paso, the local economy relies heavily on federal workers, according to El Paso Chamber of Commerce president Richard Dayoub. Customs and Border Protection, the Drug Enforcement Administration, the FBI and the military all have a large presence there.

"Our community will face significant challenges because of the level of federal employees in this region," Dayoub said. "If each one of those employees takes a 20-percent pay cut, that means not buying new cars and fewer nights our for dinner. It means less visits to the shopping mall."

In addition to Boehner, Senate Majority Leader Harry Reid, D-Nev., Senate Minority Leader Mitch McConnell, R-Ky., and House Minority Leader Nancy Pelosi, D-Calif., attended Friday's meeting.