Obama Begins His Struggle to Delay Dramatic New Cuts

The president of the United States urged Congress on Tuesday to agree on an interim package of measures to avoid the execution of a drastic and indiscriminate reduction of the national and defense spending by $1.2 billion. The package would take effect automatically on March 1, and includes a series of “reasonable” cuts and a tax reform. Barack Obama expects to delay the cuts by some months via this short-term solution until the Capitol reaches an agreement regarding deficit reduction.

The radical public spending cuts, known as sequestration in the U.S., should have gone into effect on Jan. 2, but because of an in extremis agreement that took place a day before to avoid the fiscal cliff, the due date was extended by two months. In an appearance before the media, Obama said, “And keep in mind that some of these spending cuts that Congress has said will automatically go into effect have an impact on our Defense Department, but they also have an impact on things like Head Start. And so there are some programs that are scheduled to be cut that we’re using an axe instead of a scalpel — may not always be the smartest cuts.”

The sequestration is part of the Budget Control Act that the president signed in 2011 which states that, if Congress is unable to agree on a reduction of the deficit, reduction will come into effect automatically over 10 years in a series of cuts to public spending for a total of $1.2 billion. This reduction would significantly affect the Pentagon, the budget of which would be reduced by $487 billion in the next decade, as well other public programs.

Obama has always claimed that those cuts would never be implemented, and this Tuesday he warned against the negative effects of not reaching an agreement to avoid them. “But we’ve also seen the effects that political dysfunction can have on our economic progress,” said the president. The Congressional Budget Office has estimated that allowing the implementation of the cuts could mean a 0.7 percent fall in GDP. This week it came to be known that the U.S. economy contracted 0.1 percent in the last three months of 2012.

The president has defended the same theory that he wielded during the negotiations to avoid the fiscal cliff as a way to avoid the implementation, on March 1, of a new set of cuts: a cut in public investment in certain areas, compensated by the elimination of fiscal extensions for the rich and for certain enterprises.

Obama has indicated that the proposals he made to Speaker of the House John Boehner in December “are still very much on the table.” This was an offer that Boehner roundly rejected immediately after the president had finished his press conference; he declared that a tax hike for the rich, like the one that he had to accept in order to avoid the fiscal cliff, would no longer be tolerated. “We believe there is a better way to reduce the deficit,” he pointed out his press release.

March 1 is not the only deadline in regard to the deficit that grips the U.S. If Congress does not agree on a budget before May 19, the date on which the extension to raise the debt ceiling expires, the country will be compelled to suspend payments, as it will no longer be able to borrow more money to repay its debts.