Obama proposes interim budget deal to buy time, avoid automatic tax hikes and spending cuts in March

Tuesday 05 February 2013 18.43
President Obama will propose an interim budget aimed at averting automatic tax hikes and spending cuts in March
President Obama will propose an interim budget aimed at averting automatic tax hikes and spending cuts in March

President Barack Obama has asked the US Congress to avoid deep spending cuts with a stopgap bill and said he is committed to cutting the nation's deficit to manageable levels over the long term.

Obama said uncertainty over the automatic across-the-board cuts  has stunted economic growth and has the potential to do further damage.

A round of deep cuts would kick in on March 1st unless Congress acts, and the president asked lawmakers to pass a modest bill that would blunt the impact of the reductions for several months to allow time to produce a broader package to address the deficit.

Obama said he remains committed to achieve the full $4 trillion in deficit reduction seen as necessary to bring the nation's sea of red ink under control. But he insisted that deficit reduction come in part from tax reforms.

The White House and Congress agreed on a deal at the beginning of this year that avoided the "fiscal cliff" of spending cuts and tax increases by raising tax rates on households making more than $450,000 a year.

The deal put off the huge spending cuts for just two months, however, and Obama is eager to give both sides more time to resolve that issue.

If launched on March 1st as scheduled, the cuts would reduce federal spending across the board by about $85 billion for one year, split evenly between military and domestic programs. The total through 2022 would be about $1.2 trillion.

The Republican-controlled House last year passed two measures that sought to replace the sequester cuts and shield military spending by shifting the burden onto domestic programs, including many that serve the poor, such as Medicaid, food stamps and social services block grants that fund programs like Meals on Wheels. The measure was never taken up in the Democratic-controlled Senate.

Boehner said the sequester policy stemmed from Obama and rejected the idea of increasing tax revenue in a future deal.

"President Obama first proposed the sequester and insisted it become law," he said in a statement.

"We believe there is a better way to reduce the deficit, but Americans do not support sacrificing real spending cuts for more tax hikes. The president's sequester should be replaced with spending cuts and reforms that will start us on the path to balancing the budget in 10 years," he said.

Obama's statement is the latest in a series of moves to outline his policy agenda before his State of the Union address on February 12th. The president has recently made trips outside of Washington to promote proposals to reform immigration and reduce gun violence.

Obama's push for a short-term deal to avoid the sequester comes after a sharp drop in defense spending helped cause US economic output to shrink at the end of last year.

The White House has attacked Republican leaders for threatening to use the sequestration deadline as a bargaining chip to obtain cuts to government retiree and healthcare programs.

White House spokesman Jay Carney last week said the sharp drop in defense outlays was caused in part by uncertainty over whether the spending cuts, which would hit defense and non-defense programs in equal measure, would go into effect.

The US economy contracted by 0.1% in the last three months of 2012 on the deepest plunge in defense spending in 40 years.

Keywords: barack obama