US President Barack Obama Tuesday called for a balanced program of stop gap spending reductions and tax reforms to avert punishing multi-billion dollar automatic budget cuts due to kick in on March 1.
Obama said the fragile US economy could not afford the hit from huge cuts to defense and other government programs, known as the sequester, and the jobs of Americans should not be held hostage to partisan wrangling in Washington.
The president said if Congress could not act on a bigger deficit cutting package by March 1, lawmakers should pass a smaller plan of spending cuts and tax reforms to delay the economically damaging impact of the sequester.
“There is no reason that the jobs of thousands of Americans who work in national security or education or clean energy, not to mention the growth of the entire economy, should be put in jeopardy,” Obama told reporters.
“Let me repeat, our economy right now is headed in the right direction. It will stay that way as long as there aren’t any more self-inflicted wounds coming out of Washington.”
The Congressional Budget Office reported Tuesday that if the sequester is put through, the US budget deficit will shrink sharply this year but that also economic growth will be crunched from 2012’s 1.9 percent to just 1.4 percent.
“If all of the fiscal tightening still embodied in current law for 2013 was removed, growth in real GDP would be about 1.5 percentage points higher this year than CBO currently projects,” the study said.
Obama said his short-term spending would allow the White House and Congress more time to come up with a plan to cut the deficit, which he insists, despite Republican opposition, must include new revenue from higher taxes.
The sequester was agreed by the president and Congress last year to be so punishing that it would force Washington’s warring political factions to forge an agreement on deficit cuts.
But no agreement is in sight, and the cuts have already been put off once, by a short-term deal agreed between Obama and Republicans late last year.
House Republican Speaker John Boehner Tuesday blamed Obama for the sequester, which many observers now believe will come into force, despite its punitive impact on defense and social programs and the fragile US economy.
“We believe there is a better way to reduce the deficit, but Americans do not support sacrificing real spending cuts for more tax hikes,” Boehner said in a statement.
“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.”
Cuts due to come into force in March will slash defense spending by $55 billion and non defense discretionary spending by $27 billion this year, and will have a painful impact on the economy.
The Bipartisan Policy Center has warned that a million jobs will be lost by the end of next year caused by a slowdown brought on by the cuts.