March 4 (Bloomberg) -- President Barack Obama and lawmakers in Congress are taking a wait-and-blame approach as automatic, across-the-board spending cuts begin to trickle through the federal government -- cuts that weren’t intended to take effect.
Even as the president called Democratic and Republican legislators over the weekend, Obama’s aides and congressional leaders signaled the budget reductions would continue for weeks, possibly months. Both sides indicated that revisiting the reductions would begin after they resolve an approaching confrontation over legislation that’s needed to keep federal agencies running beyond March 27, placing a premium on avoiding a government shutdown.
Unlike in previous budget showdowns, where congressional leaders shuttled between the Capitol and the White House, lawmakers weren’t holding urgent negotiations. For his part, Obama didn’t have any scheduled public events this week specifically tied to the spending cuts.
After making three personnel announcements today, including his pick of the Wal-Mart Foundation’s president, Sylvia Mathews Burwell, as the next White House budget director, Obama used his first full Cabinet meeting of his second term to keep up pressure on Republicans.
“We are going to manage it as best we can to try to minimize the impact on American families, but it’s not the right way for us to go about deficit reduction,” Obama said at the White House. He vowed to seek out “partners on the other side of the aisle” to get an agreement that includes spending cuts, more revenue and changes in entitlement programs.
“I don’t think anyone quite understands how it gets resolved,” House Speaker John Boehner, an Ohio Republican who called the cuts “silly,” said on NBC’s “Meet the Press” program. “After we do our continuing resolution, we’ll begin to work on our budget.”
One area of agreement between Republican and Democratic lawmakers over the weekend was avoiding a government shutdown when spending authorization for operations expires March 27. Gene Sperling, the president’s top economic adviser, said on “Meet the Press” that Obama doesn’t want to manufacture “another crisis” and Boehner said the House will vote this week on legislation to fund the government for the rest of the fiscal year, which ends Sept. 30.
“I believe we’re going to be able to work out passing the continuing resolution later in March on a bipartisan basis through both the House and the Senate,” Senate Minority Leader Mitch McConnell, Kentucky Republican, said on CNN’s “State of the Union” program.
Congress mandated $1.2 trillion in spending cuts spread over nine years as part of a 2011 deal to increase the U.S. debt limit. Though the reductions were designed to be so onerous that Congress and the president wouldn’t let them occur, a congressional impasse allowed the onset March 1 of the reductions set to total $85 billion this year. During his 2012 presidential campaign, Obama promised that the cuts, which he has described as a “meat cleaver approach,” wouldn’t happen.
Negotiations to address the reductions have stalled as Democrats say they must be replaced by a combination of lower spending, including in entitlement programs, and higher revenue from closing loopholes in the tax code for the wealthiest Americans. Republicans insist that new taxes won’t be part of any deal.
With some federal workers already receiving furlough notices and Obama describing the effects of the cuts as a “slow grind,” he and his aides, as well as Republicans, are swinging between playing down the immediate impact and sounding alarms over the long-term economic threat.
“Yes, it’s not going to hurt as much on day one,” Sperling said on ABC’s “This Week” program. “But again every independent economist agrees, it is going to cost our economy 750,000 jobs just as our economy has a chance to take off.”
Even as the budget battles unfold, Obama said he would continue to separately push his ambitious second term agenda that includes immigration changes and gun control. “We’re not going to stop working,” Obama said today.
Administration officials expect that as more Americans begin to feel the 2.4 percent cut in the federal budget, public pressure will force Republicans to cave on their demands.
If the cuts stay in effect, the reduced spending eventually may cause longer waits for air travelers, delays in production permits for oil and gas drilling, shorter hours at national parks, and the closing of meat plants that the Agriculture Department doesn’t have the personnel to inspect.
Sperling said that “as this pain starts to gradually spread,” the administration is counting on Republicans to come forward and accept a compromise that includes new revenue as well as changes to entitlement programs such as Medicare.
“More Republican colleagues who are concerned about this harm to their constituents will choose bipartisan compromise on revenue-raising tax reform with serious entitlement reform,” Sperling said on ABC.
Republican leaders rejected that. McConnell, who called the cuts “modest,” said his party is “willing to talk” about a reconfiguration that doesn’t lead to higher taxes.
“We’re willing to talk to him about reconfiguring the same amount of spending reduction over the next six months,” McConnell said on CNN. “So far, I haven’t heard a single Senate Republican say they’d be willing to raise a dime in taxes to turn off the sequester.”
While private and government economists have said the cuts may trim economic growth, investors have signaled they aren’t concerned about the impact on the $15.8 trillion U.S. economy.
The Standard & Poor’s 500 Index of U.S. equities has risen 6.4 percent this year and the dollar led gains in world markets last month.
The reductions’ impact will become clearer over the next several weeks, as agencies inform affected government contractors of pullbacks and notify employees about unpaid time off, most of which won’t begin for at least a month. Still, the impact is likely to be gradual since agencies have had five months -- since the start of the fiscal year Oct. 1 -- to plan for changes.
The Defense Department gets about half the cuts with the rest spread throughout the federal government. Agencies need to draw equally from every “project, program and activity,” according to the law. Military pay, veteran’ benefits and Social Security benefits are exempt from the reduction.
Once Obama officially ordered the cuts to begin on the night of March 1, the budget office transmitted a document to Congress itemizing reductions to hundreds of federal programs, updating an earlier report to lawmakers.
“The cuts required by sequestration will be deeply destructive to national security, domestic investments, and core government functions,” acting White House Budget Director Jeffrey Zients said in a letter to Boehner sent with the list.
Medicare will see a 2 percent reduction, while the National Institutes of Health, which funds medical research, will be cut by 5 percent, or about $1.5 billion, according to the budget office. Space operations at the National Aeronautics and Space Administration will be cut by 5 percent, or $212 million, and the national park system, which runs 398 parks across the country, would get a reduction of 5 percent, or $113 million.
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