US braces for $ 85 bn in budget cuts


Published — Wednesday 27 February 2013

Last update 28 February 2013 3:50 am

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WASHINGTON: President Barack Obama and a divided Congress seemed ready to make painful history Friday: The first time they'll miss a crucial economic deadline.
The $ 85 billion in across-the-board spending cuts to defense and other programs had been designed to be so ugly that Washington would be forced to find a better way to tackle the country's $ 11.7 trillion debt. But no talks on a better solution appeared to be under way.
Two days before the deadline, some opposition Republicans seemed ready to let the cuts take effect and let attention turn to an even more worrying fiscal deadline at the end of March — a possible government shutdown.
It's hardly the scenario Obama promised as he ran for re-election last year 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. And government agencies, faced with cuts that mean taking out the same rough percentage whether or not certain budgets are already streamlined, continued to warn what would happen.
Air traffic controllers were the latest to speak up, saying Wednesday that the cuts could force some of the nation's busiest airports to close runways, causing widespread flight delays and cancellations. The Department of Homeland Security has said it will have to furlough 5,000 border patrol agents.
Americans appear exhausted by the march of fiscal crises. Three out of 4 say they aren't following the spending cuts issue very closely, according to a Pew Research Center poll released this week.
Efforts to close the budget gap have been hurt by Republicans' refusal to accept new tax increases and Democrats' insistence that any spending cuts be matched by tax increases.
The spending cuts would carve $ 85 billion from the US budget through the end of the fiscal year at the end of September, and $ 1.2 trillion over the next decade.
Economists agree that policymakers should delay the deep cuts until the economy has strengthened, but they say lawmakers should come up with a realistic long-term plan to fix the debt as soon as possible.
The cutting set to start Friday is "haphazard, and cuts good programs and bad. It's not good budgeting practice," says Mark Zandi, chief economist at Moody's Analytics.
The country's deficits have exceeded $ 1 trillion the past four years.
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.
Top Republicans support 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 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.
Despite the grim predictions, there is breathing room for political settlement if Friday's deadline comes and goes. 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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