Bloomberg News

Obama Makes Cuts Personal in Strategy to Bend Congress

March 02, 2013

Obama Says Spending Cuts Will Be ‘Slow Grind’ on Economic Growth

President Barack Obama speaks to the media about sequestration in the Brady Press Briefing Room at the White House in Washington on March 1, 2013 following a meeting with Speaker of the House John Boehner and Congressional leaders. Photogapher: Saul Loeb/AFP via Getty Images

President Barack Obama is putting the emphasis on the personal consequences of U.S. spending cuts that took effect yesterday as he counts on pressure from voters to force Republicans into a compromise.

While acknowledging that most people won’t feel an immediate impact from the across-the-board spending reductions in government operations from airports to military bases, the president warned yesterday of long-term damage to the economy.

“All of this will cause a ripple effect throughout our economy,” Obama said at a news conference called a half-hour after meeting with the top four leaders of Congress. “Layoffs and pay cuts means that people have less money in their pockets, and that means that they have less money to spend at local businesses.”

Congress mandated $1.2 trillion in across-the-board spending cuts spread over nine years as part of a 2011 deal to increase the U.S. debt limit. They were designed to be so onerous that Congress and the president wouldn’t let them occur. During his 2012 presidential campaign, Obama promised that the cuts, which he has described as a “meat cleaver approach,” wouldn’t happen.

Last night, with the deadline at hand and no agreement on an alternative, Obama issued the order putting the reductions into effect -- $85 billion worth for the remaining seven months of the current fiscal year.

Placing Blame

He also is escalating his campaign-style strategy to cast blame on Republicans for the budget standoff, counting on public pressure to sway his opponents.

“Unemployment will not go down as quickly as it would have. And there are lives behind that,” Obama said. The sequestration is “just dumb. And it’s going to hurt individual people and it’s going to hurt the economy overall.”

As he spoke, Congress had already adjourned for weekend, and he urged citizens to demand that Republicans accept what he called a balanced budget package. He said that means one that includes revisions to entitlement programs such as Medicare, as well as more tax revenue without raising rates.

He said he believed “common sense” would prevail once “members of Congress start hearing from constituents who are being negatively impacted” by the sequestration.

Republicans placed ownership of the sequestration on the president and his party for failing to come up with an alternative proposal.

No Plan

“Even today there’s no plan from Senate Democrats or the White House to replace the sequester,” House Speaker John Boehner, an Ohio Republican, said in an interview on NBC News’s “Meet the Press” scheduled to air tomorrow, according to excerpts released by NBC.

“Over the last 10 months, House Republicans have acted twice to replace the sequester,” Boehner said in the interview, referring measures passed by the chamber last year that expired when the new Congress took office early this year.

Obama spoke shortly after a final meeting at the White House with congressional leaders took place yesterday and hours before he issued the order for federal departments and agencies to begin cutting their budgets. The meeting, which lasted less than an hour, was largely a formality, with little expectation it would resolve the disagreements over how to replace the total of $1.2 trillion in cuts that sequestration would implement over nine years.

Tax Issue

The meeting’s principal participants -- which aside from Boehner included Senate Minority Leader Mitch McConnell, a Kentucky Republican, Senate Majority Leader Harry Reid, a Nevada Democrat, and House Minority Leader Nancy Pelosi, a California Democrat -- emerged from the session with dueling statements that didn’t deviate from the positions both sides have staked out in recent weeks.

Boehner left the White House without giving any indication that his party’s lawmakers would budge from their rejection of raising tax revenue. Obama has called for replacing sequestration with a combination of reduced spending and higher revenue from closing loopholes in the tax code for the wealthiest Americans.

“The president got his tax hikes on Jan. 1,” Boehner said yesterday, referring to the deal at the end of last year that let income-tax rates rise for top earners.

He said the House will vote next week on legislation to fund the government for the rest of the fiscal year so Congress won’t have to deal with the risk of a government shutdown while negotiating an agreement on cutting the deficit.

‘Preventable’ Crisis

Obama, too, said he wanted to avoid a shutdown, describing the other budget conflict as “preventable.”

“There’s no reason why we should have another crisis by shutting the government down in addition to these arbitrary spending cuts,” the president said.

The Democratic and Republican exchanges continued into the weekend, with Obama saying in his weekly radio address that “the longer these cuts remain in place, the greater the damage.” Cathy McMorris Rodgers, the fourth-ranked Republican in the House, said in her party’s response that “the American people know full well that if they give this White House more tax revenue, it will be spent.”

With no formal negotiations taking place between Obama and congressional leaders to avert sequestration, lawmakers have been telegraphing for weeks that they expected the automatic

spending cuts to go into effect, at least temporarily.

Obama’s Frustration

Obama, in expressing his frustration with Republicans yesterday, made light of what he said was their inability to work with him. He said he has asked himself what he could do to make House lawmakers “not paint horns on my head.”

The showdown is occurring amid signs the world’s largest economy is on stronger footing. And while private and government economists have said the cuts may trim growth if they stay in place, investors have signaled they aren’t concerned.

The Standard & Poor’s 500 Index, which rose 0.2 percent to 1,518.20 in New York yesterday, is up 6.4 percent this year. Manufacturing in the U.S. expanded at a faster pace than forecast in February, reaching the highest level since June 2011, the Institute for Supply Management’s factory index showed yesterday. The Thomson Reuters/University of Michigan final index of consumer sentiment climbed to 77.6 last month from 73.8 in January, which may indicate a boost in consumer spending.

Administration Warning

The administration has warned that the spending cuts, split between defense and domestic programs, threaten to eventually send poor children home from pre-school, prolong airport security wait times, reduce unemployment benefits and furlough defense workers.

Obama, while saying the automatic cuts wouldn’t lead to a “huge financial crisis,” also cautioned yesterday that “people are going to be hurt.”

The president, who has been criticized by Republicans for hyping the consequences, offered a montage of those lives -- Border Patrol agents “in the hot sun” getting a 10 percent pay cut, troops deployed to Afghanistan worrying about their children’s education on an Army base being disrupted, and janitors who clean the Capitol building managing with less pay.

To contact the reporter on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net


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