Obama: No Deal to Avoid "Dumb, Arbitrary" Cuts

3:44 PM, Mar 1, 2013   |    comments
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Video: Obama: Could Be 'Weeks' or 'Months' to Fix Budget

US President Barack Obama speaks during an event at the Decatur Community Recreation Center February 14, 2013 in Decatur, Georgia. Obama is traveling to Georgia to promote economic and educational initiatives he spoke about in this week's State of the Union. (BRENDAN SMIALOWSKI/AFP/Getty Images)

David Jackson, USA TODAY

  • President Obama, congressional leaders fail to reach sequester deal
  • The sequester, $85 billion in automatic budget cuts, begin late Friday
  • Obama, Republicans argue over taxes in new debt cut deal

WASHINGTON -- Preparing to leap into the fiscal unknown, President Obama and congressional Republicans failed to reach a deal Friday to avert the $85 billion in automatic, across-the-board budget cuts set to begin at midnight.

"These cuts will hurt our economy, they will cost us jobs," Obama said after meeting with congressional leaders for a little less than an hour to discuss what is known as "the sequester."

Obama attributed the "dumb, arbitrary" cuts to Republican refusal to agree to a new debt reduction plan that includes higher taxes on wealthy Americans through the closing of loopholes and deductions.

House Speaker John Boehner, R-Ohio, said after the meeting that Obama got tax hikes in the January agreement to end the last budget impasse, the so-called fiscal cliff.

"The discussion about revenues in my view is over," Boehner said. "It's about cutting the spending in Washington."

Boehner did say that Congress is planning to extend the continuing resolution for funding government past its March 27 expiration date, so that sequester talks will not be clouded by the prospect of a government shutdown.

Obama said debt reduction should include both spending cuts and higher taxes on the wealthy, calling it a "balanced plan" that can end the cuts that will slow the economy, cost people jobs, and possibly undermine national defense.

The Senate's top Republican, Mitch McConnell of Kentucky, had said before the meeting that any alternative to the sequester must involve less federal spending, not higher taxes.

"I'm happy to discuss other ideas to keep our commitment to reducing Washington spending at today's meeting," McConnell said. "But there will be no last-minute, back-room deal and absolutely no agreement to increase taxes."

Obama and Vice President Biden met in the Oval Office with a group of congressional leaders that included the top two Republicans, McConnell and Boehner. The top congressional Democrats -- Senate Majority Leader Harry Reid, D-Nev., and House Minority Leader Nancy Pelosi, D-Calif. -- also attended the session.

The meeting took place on deadline day for the sequester, $85 billion in automatic domestic and defense cuts that Democrats and Republicans say will hurt the economy and undermine national security. The automatic, across-the-board sequester cuts become official at midnight.

RELATED | No Automatic Cuts Until Midnight Friday

But there are no signs the parties have made progress on the issue that has divided them in this and previous budget disputes -- the best way to cut a federal debt that now tops $16.5 trillion.

Obama has called for debt reduction that includes both budget cuts and increased tax revenue by eliminating loopholes and deductions that benefit the wealthy.

"We should work together to reduce our deficit in a balanced way, by making smart spending cuts and closing special interest tax loopholes," Obama said in his statement.

Republicans, meanwhile, say Obama got higher tax rates as part of a January agreement to head off the series of tax hikes and spending cuts known as "the fiscal cliff."

Boehner said Obama and Senate Democrats "are demanding more tax hikes to fuel more stimulus spending."

The White House meeting takes place a day after Senate Republicans and Democrats blocked each other's competing sequester plans.

After those Senate votes, Obama said that "we can build on the over $2.5 trillion in deficit reduction we've already achieved, but doing so will require Republicans to compromise. That's how our democracy works, and that's what the American people deserve."

The sequester originated as part of a 2011 agreement to break another Obama-Republican budget impasse, raising the debt ceiling.

The idea: Require a series of automatic cuts, split between defense and domestic programs, so onerous that the parties would be forced to come up with a plan to cut more than $1 trillion off the debt in 10 years.

While the parties have some progress, there has been no major debt reduction deal.

Barring a breakthrough at the White House meeting, Obama will be required by the law to issue a sequestration order by 11:59 p.m.Friday.

The order will specify reductions in various budgets in amounts calculated by the Office of Management and Budget, which would also transmit a report on the cuts to Congress.

How the sequester might play out after Friday, both economically and politically, remains uncertain.

In a speech this week to a group of CEOs, Obama said the sequester "is not a cliff," but more of "a tumble downward."

Many Americans may not feel the effects for months, Obama said, "unless you live in a town that is directly impacted by a military installation, (or) unless you're a family that now is trying to figure out where to keep your kids during the day because you just lost a Head Start slot."

Obama also told the Business Council that the sequester "is going to be a big hit on the economy," and "the worst part of it is it's entirely unnecessary. It's not what we should be doing."

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