Obama Phones Lawmakers Seeking Ways to Recast Budget Cuts

President Barack Obama has begun contacting Republican and Democratic senators in search of a budget compromise even as each party blamed the other for across-the-board cuts in government spending.

The Democratic president worked the phones yesterday, calling senators “who he thinks could be part of a caucus of common sense to help move our country forward,” National Economic Council Director Gene Sperling said today on NBC’s “Meet the Press.” He didn’t identify the senators.

Slightly more than $85 billion in cuts, affecting agencies and programs that range from the Pentagon to the Smithsonian Institution, began March 1 amid a more than two-year-old impasse over raising taxes and cutting entitlements.

Even as lawmakers are deadlocked over what to do about the so-called sequestration, both sides signaled today they don’t want a second confrontation over legislation that will be needed to keep federal agencies running beyond 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,” said House Speaker John Boehner on “Meet the Press.” The administration is amendable to legislation now being written in the House so long as it sticks to a $1.043 trillion spending level lawmakers previously agreed upon, said Sperling.

Photographer: Andrew Harrer/Bloomberg

U.S. Senate Minority Leader Mitch McConnell, a Kentucky Republican, called the 2.4 percent federal budget reduction "modest" and said his party is "willing to talk." Close

U.S. Senate Minority Leader Mitch McConnell, a Kentucky Republican, called the 2.4... Read More

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Photographer: Andrew Harrer/Bloomberg

U.S. Senate Minority Leader Mitch McConnell, a Kentucky Republican, called the 2.4 percent federal budget reduction "modest" and said his party is "willing to talk."

“The president doesn’t believe in manufacturing another crisis,” Sperling said.

Frank Meeting

Obama met with congressional leaders March 1 in what Boehner called a “polite” though “very frank” meeting on the across-the-board cuts. “There are big disagreements between the two parties” and “I don’t think anyone quite understands how it gets resolved,” said Boehner, an Ohio Republican.

Republicans will hold firm in their demands for entitlement cuts and “I’ve frankly made it my mission as speaker to address this problem because it is the greatest threat to our country,” said Boehner. “It is going to be addressed.”

Though sequestration would cut total federal spending this year by just 2 percent, the reductions are concentrated in a relatively small portion of the government’s budget so they would have an outsize effect on many programs.

Defense Cuts

Defense programs will be cut by 7.8 percent, the White House budget office estimated last week, while non-defense “discretionary” programs will see about a 5 percent cut. The effective cuts will be even bigger, the agency said, because they come in the middle of the government’s fiscal year.

In a report issued the evening of March 1, the administration itemized the impact on hundreds of programs. The National Endowment for the Arts was cut by a 5 percent, or $7 million. Medicare payments to health-care providers were pared by $11.3 billion, or 2 percent.

The budget of the Holocaust Memorial Museum in Washington D.C. shrunk by 5 percent, or $3 million. The Food and Drug Administration lost $209 million, while the Smithsonian Institution was cut by about 5 percent, or $51 million.

More than 150 budget accounts by law are immune from the cuts, including many of the government’s biggest and most popular programs. Among them: Social Security, most of Medicare, Medicaid, veterans’ benefits, the Children’s Health Insurance Program, food stamps, Pell college tuition grants and the Supplemental Security Income program, which aids the disabled poor.

Republican Proposal

Sperling, also appearing on ABC’s “This Week,” rejected a Republican proposal that would make it easier for agencies to live with sequestration by giving them more power to decide how to make the cuts. While Republicans say that would allow departments to shift funding to higher-priority initiatives, Sperling said the cuts are so big as to be unworkable.

“When you have those type of harsh spending cuts in such a short, concentrated period of time, it’s like saying to somebody, ‘You can cut off three of your fingers but you can have the flexibility to choose which ones,’” Sperling said. Democrats say they want to replace the cuts with a combination of higher taxes on the wealthy and cuts in farm subsidies and defense spending.

Sperling also rejected complaints the administration has exaggerated the impact of sequestration.

Spreading Pain

“It’s not going to hurt as much on day one,” he told ABC. “As this pain starts to gradually spread to communities affected by military spending, to children who need mental health services, to people who care about our border security, I believe that more Republican colleagues who are concerned about this harm to their constituents will choose bipartisan compromise.”

Appearing on the same program, New Hampshire Republican Kelly Ayotte said she’s willing to consider tax increases though only as part of a major budget deal, not as a temporary fix to the automatic cuts.

“I am willing to say if we take the form of lowering rates so that we can focus on economic growth and then we take a portion of that, and apply it to the debt with real entitlement reform -- but it has to go to the debt,” she said.

Senator Lindsey Graham agreed. “I’m not going to raise taxes to fix sequestration,” he told CBS’s “Face the Nation.”

The South Carolina Republican did say he is willing to consider about $600 billion in tax increases as part of a sweeping budget deal that includes entitlement spending cuts and a rewrite of the tax code.

“The way forward is a big deal,” said Graham. “a big deal, not a small deal.”

To contact the reporters on this story: Jesse Hamilton in Washington at jhamilton33@bloomberg.net Brian Faler in Washington at 1919 or bfaler@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

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