$85bn cuts kick in as US parties fail to reach deal

The Democratic White House and Republicans in Congress failed to break their political deadlock in Washington to avert $85 billion (€65 billion) of indiscriminate wide-ranging spending cuts kicking in yesterday that threaten 750,000 US jobs and slow US economic recovery.

President Barack Obama met congressional leaders from both parties for less than an hour yesterday, but the two sides failed to budge from their entrenched positions as the White House insisted on tax loopholes being closed for the wealthiest individuals and companies in a compromise to avoid the sweeping spending cuts.

Riled by the president’s election campaign-style attacks of recent days, Republicans have doggedly refused to accept any further tax increases.

‘Real’ pain

Speaking after meeting with House speaker and majority leader Republican John Boehner, Senate Republican leader Mitch McConnell and Democratic leaders in Congress, Mr Obama warned that the pain of the cuts would be “real” and blamed the GOP for the failure to reach a deal.

“Let’s be clear – none of this is necessary,” he told reporters at the White House. “It’s happening because of a choice that Republicans in Congress have made. We shouldn’t be making a series of dumb, arbitrary cuts to things.” The president said that he could not do a “Jedi mind meld” to make Republicans agree a deal to avoid the budget cuts, in a mixed reference to supernatural powers in both Star Wars and Star Trek.

“I am not a dictator – I am the president,” said Mr Obama. In the absence of a deal, the president was required by midnight to order federal agencies to reduce their budgets in a raft of across-the-board spending cuts known in Washington as “sequestration”.

Defence as target

Amid widespread disruption to education, healthcare and other services, defence programmes will be disproportionately hit as defence spending will be slashed and hundreds of thousands of civilians face periods of unpaid leave.

“Not everyone will feel the pain of these cuts right away. The pain, though, will be real. Beginning this week, many middle-class families will have their lives disrupted in significant ways,” he said.

Despite expressing frustration at the political paralysis in Congress, Mr Obama said he was hopeful that Americans would get through this latest fiscal crisis. “This is not going to be an apocalypse,” he said.

Speaking after meeting the president, Mr Boehner ruled out any further tax increases to avert the spending cuts, which will amount to $1.2 trillion over the next decade, given that taxes were raised from the richest Americans in a deal to avoid the last crisis, the so-called fiscal cliff, at the end of December.