Crippling cutbacks loom

Action needed on threatening spending cuts.
Action needed on threatening spending cuts.

WASHINGTON — The US government hurtled today toward deep spending cuts that threaten to hinder the nation’s economic recovery, after Republicans and Democrats failed to agree on an alternative deficit-reduction plan.

Locked in during a bout of deficit-reduction fever in 2011, the time-released “automatic” cuts can only be halted by agreement between Republican lawmakers and the White House.

That has proved elusive so far.

Both sides still hope the other will either be blamed by voters for the cuts or cave in before the worst effects – like air traffic chaos or furloughs for tens of thousands of federal employees – start to bite in the coming weeks.

Mitch McConnell, the Republican leader in the Senate, all but killed any hopes that President Barack Obama and top leaders of Congress can hammer out a deal in talks that began shortly after 10 a.m.

“I’m happy to discuss other ideas to keep our commitment to reducing Washington spending at today’s meeting. But there will be no last-minute, back-room deal and absolutely no agreement to increase taxes,” McConnell said.

Barring any breakthroughs, across-the-board cuts totalling $85 billion will begin to come into force at some time before midnight on Friday night.

Obama will huddle at the White House with Senate Majority Leader Harry Reid, McConnell, House of Representatives Speaker John Boehner, the top US Republican, and House Democratic leader Nancy Pelosi.

The full brunt of the belt tightening, known in Washington as “sequestration”, will take effect over seven months so it is not clear if there will be an immediate disruption to public services.

Democrats insist tax increases be part of a solution to ending the automatic cuts, an idea Republicans reject.

Congress can stop the cuts at any time after they start today if the parties agree to that. In the absence of any deal at all, the Pentagon will be forced to slice 13 per cent of its budget between now and September 30. Most non-defence programmes, from NASA space exploration to federally backed education and law enforcement, face a 9 percent reduction.

The International Monetary Fund warns that the cutbacks could knock at least 0.5 percentage point off US economic growth this year and slow the global economy.

If the cuts were to stay in place through September, the administration predicts significant air travel delays due to layoffs of airport security workers and air traffic controllers. (Reuters)

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