President Obama said that he hoped to work with members of both parties in Congress to stop the damaging impact of the $85 billion in automatic spending cuts that officially began on Friday.
In his weekly address Saturday, Obama noted that he met with the leaders of both parties Friday to try to find a way forward in light of the severe budget cuts, known in Washington as “the sequester,” that have already begun to take effect and promise to cause economic pain in communities across the country as the year progresses. The $85 billion in automatic spending cuts are scheduled to hit both defense programs and discretionary spending programs, with a few programs exempted, such as Social Security.
“These cuts are not smart,” said Obama. “They will hurt our economy and cost us jobs. And Congress can turn them off at any time—as soon as both sides are willing to compromise.”
Obama noted that beginning this week, businesses that work with the military will need to lay off workers. “Communities near military bases will take a serious blow,” he said. “Hundreds of thousands of Americans who serve their country—Border Patrol agents, FBI agents, civilians who work for the Defense Department—will see their wages cut and their hours reduced.”
Internal Revenue Service acting commissioner Steven T. Miller informed employees last week that they might need to furlough workers for five to seven days, starting this summer (see IRS Employees May Face 5- to 7-Day Furloughs from Sequester). However, the IRS wants to wait until after tax season to impose any cuts to avoid disruptions.
Obama predicted the automatic spending cuts would cause a ripple effect across the economy. “Businesses will suffer because customers will have less money to spend,” he said. “The longer these cuts remain in place, the greater the damage. Economists estimate they could eventually cost us more than 750,000 jobs and slow our economy by over one-half of one percent.”
Obama blamed Republicans in Congress for refusing to close any tax loopholes to reduce the deficit. Republicans have contended that they agreed to tax increases with the fiscal cliff deal and insisted that any other deficit reduction needed to come from spending cuts. Both Democrats and Republicans in the Senate offered competing bills last week to replace the sequester, but neither bill passed.
“Just this week, they decided that protecting special interest tax breaks for the well-off and well-connected is more important than protecting our military and middle-class families from these cuts,” said Obama. "I still believe we can and must replace these cuts with a balanced approach—one that combines smart spending cuts with entitlement reform and changes to our tax code that make it more fair for families and businesses without raising anyone’s tax rates. That’s how we can reduce our deficit without laying off workers, or forcing parents and students to pay the price. I don’t think that’s too much to ask. It’s the kind of approach I’ve proposed for two years now. A majority of the American people agree with me on this approach—including a majority of Republicans. We just need Republicans in Congress to catch up with their own party and the rest of the country.”
Obama acknowledged that some Republicans in Congress are willing to negotiate a deal with Democrats to find a solution for the budget sequester. He called them a “caucus of common sense.” Under the Budget Control Act of 2011, sequestration would otherwise impose automatic spending cuts every year over the next 10 years to reach a target of $1.2 trillion in deficit reduction unless Congress can agree on an alternative.
“Now, I know there are Republicans in Congress who would actually rather see tax loopholes closed than let these cuts go through,” said Obama. “And I know there are Democrats who’d rather do smart entitlement reform than let these cuts go through. There’s a caucus of common sense. And I’m going to keep reaching out to them to fix this for good."
In a press conference Friday, Obama blamed Republicans in Congress for refusing close any tax loopholes. “As recently as yesterday, they decided to protect special interest tax breaks for the well-off and well-connected, and they think that that’s apparently more important than protecting our military or middle-class families from the pain of these cuts,” he said. “I do believe that we can and must replace these cuts with a more balanced approach that asks something from everybody: Smart spending cuts; entitlement reform; tax reform that makes the tax code more fair for families and businesses without raising tax rates—all so that we can responsibly lower the deficit without laying off workers, or forcing parents to scramble for childcare, or slashing financial aid for college students.”
However, he said he would continue to work with Congress to find a compromise on a balanced approach to replace the budget cuts.
“I’m going to keep on reaching out to them, both individually and as groups of senators or members of the House, and say to them, let’s fix this—not just for a month or two, but for years to come,” he said. “Because the greatest nation on Earth does not conduct its business in month-to-month increments, or by careening from crisis to crisis. And America has got a lot more work to do.”
House Speaker John Boehner, R-Ohio, addressed questions about the budget sequester during an appearance on NBC’s “Meet the Press” with David Gregory on Sunday. He noted that the House has passed a plan twice, over the past 10 months, to replace the sequester. “Senate Democrats have done nothing,” he insisted. “It's time for them to vote. It's time for us to get back to regular order here in Congress. … We have this sequester because the president demanded it and because Senate Democrats have refused to act.”
Boehner rejected the idea of including tax increases as part of the replacement to the sequester, insisting that the fiscal cliff deal in January included enough tax increases.
“[T]he President got his tax hikes on January the first,” he said. “If we're going to get rid of loopholes, let's lower rates and make the tax code fair for all Americans. … American families' wages aren't growing. They're being squeezed. And as a result, we've got to find a way through our tax code to promote more economic growth in our country. We can do this by closing loopholes, bringing the rates down for all Americans, making the tax code fairer. It will promote more economic growth.”
However, Boehner backed away from the idea of a government shutdown, and said Republicans would work with Democrats on a continuing resolution to fund the government.
“The House next week will act to extend the continuing resolution through the end of the fiscal year, September 30th,” he said. “The President this morning agreed that we should not have any talk of a government shutdown. So I'm hopeful that the House and Senate will be able to work through this.”
Boehner also hinted that they might find a way to resolve the problem of the budget sequester through the regular budget process, even though Congress has failed to agree on a full-year budget in recent years.
“After we do our continuing resolution, we'll begin to work on our budget,” he said. “The House has done a budget every year that I've been Speaker. The Senate hasn't done a budget for four years. They've committed to do a budget this year. And I hope that they do. And out of that discussion and out of that process, maybe we can find a way to deal with our long-term spending problem.”