US braces for $85bn in budget cuts

The US government is heading towards $85bn in automatic budget cuts, after Republicans and Democrats failed to agree on an alternative deficit-reduction plan.

The cuts to areas including the military and domestic spending are due to hit late on Friday after the White House and congressional Republicans failed to come up with a better plan to tackle the country’s $11.7 trillion debt.

Barack Obama, the US president, has invited congressional leaders to the White House for last-minute negotiations before the deadline for cuts that the IMF has said could have a global impact on growth.

Obama is required by law to order the budget cuts, known as a sequester, by 11:59pm on Friday Washington time, and the cuts are all due to be made by the end of the year unless a political deal can be reached.

The president says the problem with the Congressional stand-off is not technical, “it’s political”.

Obama said that by refusing to allow a vote on a bill that included a balance of tax revenue and targeted cuts Republicans were “threatening our economy with a series of arbitrary, automatic budget cuts that will cost us jobs and slow our recovery”.

Political observers in Washington said an agreement is unlikely before the cuts are due to take effect.

Going through the motions on Thursday, senators failed to advance two bills, one Democratic, one Republican, to avert the sequester.

Republicans who lost a showdown on raising tax rates on the rich late last year, have refused to accept any revenue raises, part of the “balanced” solution, also involving targeted spending cuts that the president wants.

‘Apocalyptic predictions’

John Cornyn, the number two Senate Republican, said Obama and Democrats had overstated “apocalyptic predictions” of the impact on domestic spending.

“They are predicting a disaster that will not occur,” Cornyn said.

Jay Carney, the White House spokesman, said on Thursday it would take time for the full impact of the sequester to be felt.

“You cannot responsibly cut $85bn out of the budget in seven months without having … dramatic effects on the defence industry and civilian workers, on our national security readiness, on teachers,” Carney said.

The automatic cuts are the result of a deadline set after earlier negotiations on trimming the debt by $1.2 trillion over a decade.

But politicians from both sides have already acknowledged that a sequester is a reality, at least temporarily, and that a solution could arise from March negotiations over funding government operations for fiscal year 2013.

The cuts would carve five percent from domestic agencies and eight percent from the Pentagon between now and October 1, but would leave several major programmes alone, including the Social Security pension programme, the Medicaid health care programme for the poor and food stamps.

That bill may be the top focus of talks between Obama, House Speaker John Boehner, Republican Senate Minority Leader Mitch McConnell and the top Senate and House Democrats Harry Reid and Nancy Pelosi in the Oval Office on Friday.