Belfast Telegraph

Friday 26 December 2014

Obama sounds cuts impasse warning

US President Barack Obama has warned that uncertainty over spending cuts 'is already having an effect'
US President Barack Obama has warned that uncertainty over spending cuts 'is already having an effect'

Barack Obama has warned that looming automatic spending cuts are already affecting America's economy, and the nation's homeland security chief said borders would be less secure if billions of dollars were yanked from the budget on Friday.

Despite the urgent rhetoric, there was no indication the White House and congressional Republicans were actively negotiating a deal to avoid the 85 billion dollars (£56bn) in budget cuts ahead of the end-of-week deadline.

Congressional leaders have recently indicated their willingness to let the cuts take effect and stay in place for weeks, if not much longer.

"The uncertainty is already having an effect," Mr Obama said. "Companies are preparing lay-off notices. Families are preparing to cut back on expenses. The longer these cuts are in place, the bigger the impact will become."

The automatic cuts were designed to be so unattractive and damaging that they would force Congress and the Obama administration to find a better way to address the country's massive deficit. They were meant to take effect only if a congressional super-committee failed to come up with at least one trillion dollars in savings from benefit programmes.

Republicans insist reduced spending needs to be the focus of a deal and have rejected the president's demand to include higher taxes as part of a compromise. They say legislation passed in early January already raises taxes on the wealthiest Americans to generate an estimated 600 billion dollars for the treasury over a decade.

Mr Obama is now proposing closing tax loopholes that benefit the wealthiest Americans and corporations.

"Mr President, you got your tax increase," said House of Representatives speaker John Boehner, the top Republican in Congress. "It's time to cut spending here in Washington."

The last known conversation between Mr Obama and Republican leaders was last week and there have been no direct meetings between the parties this year.

The budget-cutting mechanism, known as sequester, could affect everything from commercial flights to classrooms to meat inspections. Domestic and defence spending alike would be trimmed, leading to temporary lay-offs for hundreds of thousands of government workers and contractors.

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