3 days left: US braces for $85 bn in budget cuts

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President Barack Obama and a divided Congress seem ready to make history Friday. (Reuters) President Barack Obama and a divided Congress seem ready to make history Friday. (Reuters)
SummaryPresident Barack Obama and a divided Congress seem ready to make history Friday.

President Barack Obama and a divided Congress seem ready to make history Friday: The first time they'll miss a crucial economic deadline.

The $85 billion in across-the-board spending cuts had been designed to be so ugly that Washington would be forced to propose a better way to tackle the country's massive debt, but no move was made Tuesday to make a deal.

That's hardly the rosy scenario Obama promised as he ran for re-election and tried to convince voters that Washington would be a different place in his second term.

Experts believe the standoff is already slowing the fragile economy's recovery from the Great Recession. The latest Associated Press Economy Survey of 37 economists found that most worry that the budget fights will persist for much of 2013 and hinder growth.

Obama on Tuesday warned that the government-wide cuts could hurt military readiness and called the move a "self-inflicted wound that doesn't have to happen.''

But some opposition Republicans see the battle as their best opportunity to stand their ground and exact deep spending cuts from Obama _ even if it means taking money from the Defense Department, a step Republican lawmakers have traditionally opposed.

Many Republicans believe they have a mandate to cut spending significantly. They maintained control of the House of Representatives _ even though it lost seats _ in the November election, in part by pledging to cut government spending and block Obama's proposals for increasing taxes.

The White House has warned that the cuts could affect everything from commercial flights to classrooms to meat inspections and lead to furloughs for hundreds of thousands of workers.

Top Republicans were lining up behind a plan that wouldn't replace the cuts but would give Obama's agency heads, such as incoming Defense Secretary Chuck Hagel, greater discretion in distributing the cuts. The idea is that money could be transferred from lower-priority accounts.

But Obama rejected the idea, saying there's no smart way to cut such a large chunk from the budget over just seven months _ the amount of time left in the fiscal year.

"You don't want to have to choose between, `Let's see, do I close funding for the disabled kid, or the poor kid? Do I close this Navy shipyard or some other one?''' Obama said. "You can't gloss over the pain and the impact it's going to have on the economy.''

Giving the Obama administration more authority could take pressure off of Congress to address the cuts. But the White House is also keenly aware that it would give Republicans an opening to blame Obama, instead of themselves, for every unpopular cut he makes.

Obama wants any deficit-reduction deal to include both targeted cuts and tax increases, but Republican congressional leaders insist on reduced spending alone. Obama is proposing closing tax loopholes that benefit the wealthiest Americans and corporations. Many Republicans say they are done raising revenue after letting taxes on top earners increase in December.

In the House, Speaker John Boehner said he'd already done his part, saying the House twice passed bills to replace the cuts with more targeted reductions.

"We should not have to move a third bill before the Senate gets off their ass and begins to do something,'' Boehner told reporters.

Despite the grim predictions, there is breathing room for political settlement if Friday's deadline comes and goes. Federal workers would be notified next week that they will have to take up to a day every week off without pay, but the furloughs won't start for a month due to notification requirements.

Many of the cuts to hit the Defense Department and other federal agencies would come in later years and could be partially offset by cuts in programs that are wasteful or behind schedule.

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