White House Report Warns Congress Budget Cuts Are ‘Destructive’

Brian Faler and Roger Runningen, ©2012 Bloomberg News

Published 9:25 p.m., Friday, September 14, 2012

Comments (1)

Larger | Smaller

Printable Version

Email This
Font

Sept. 15 (Bloomberg) -- An Obama administration report cataloguing the impact of $1.2 trillion in looming spending cuts illustrates the stakes as lawmakers debate what to do about the U.S. deficit less than two months before the election.

The White House budget office said the cuts, known as sequestration and set to start in January, would undermine economic investment and cause “severe harm” to initiatives including food-safety inspections, air-traffic control and support for schools. The Pentagon would be forced to juggle accounts to maintain the war effort and delay repairing or buying equipment, according to the report released yesterday.

“Sequestration would be deeply destructive to national security, domestic investments and core government functions,” the 394-page report said. “The administration strongly believes that sequestration is bad policy, and that Congress can and should take action to avoid it by passing a comprehensive and balanced deficit reduction package.”

The report, ordered by Congress, comes less than two months before a presidential election in which President Barack Obama and Republican Mitt Romney have offered starkly different plans to address the government’s red ink. Obama is pressing to raise taxes on the wealthiest Americans to help pay for government programs. Romney argues that doing so would hit small businesses and hurt job creation at a time when the unemployment rate has been above 8 percent for 43 months.

Punitive Step

The automatic, across-the-board reductions would begin on Jan. 2, unless Congress adopts an alternative, and would designate annual reductions through 2021. The sequestration is a punitive step lawmakers imposed upon themselves for failing last year to reach a deal to cut deficits by at least $1.2 trillion over a decade.

The cuts in fiscal 2013 would amount to $109.3 billion, equally drawn from defense and non-defense programs, and would hit agencies in the middle of the government’s fiscal year, according to the Office of Management and Budget report.

The deficit is projected this year to reach $1.1 trillion, which would make it the fourth consecutive year the government has run trillion-dollar shortfalls.

That has contributed to a recent run-up in the debt, which has climbed more than 75 percent in the past four years. At $11.3 trillion, or 73 percent of the nation’s gross domestic product, the publicly held debt this year is projected to reach the highest level since shortly after World War II. Moody’s Investors Service warned earlier this week it may join Standard & Poor’s in downgrading the U.S.’s credit rating if lawmakers don’t agree next year on a deficit plan.

Partisan Finger-Pointing

Neither party wants to see the cuts imposed, though there is little agreement on what to swap in their place, and lawmakers don’t plan to address the issue in earnest until after the Nov. 6 election.

Obama’s budget advisers said the reductions would affect more than 1,200 budget accounts and blamed Republican lawmakers for focusing strictly on spending cuts. House Republicans have offered “particularly irresponsible approaches” that would “shift the burden of deficit reduction onto the middle class and vulnerable populations and represent the wrong choices for the nation’s long-term growth,” the report said.

A plan endorsed in May by House Republicans would replace much of next year’s cuts with savings carved out of food stamps, Medicaid, federal workers’ benefits, the Consumer Financial Protection Bureau and other spending programs. They would allow some of the scheduled cuts to take effect, such as the 2 percent reduction in Medicare.

‘Common-Sense’ Cuts

The Republican plan “replaces the president’s dangerous defense sequester with common-sense spending cuts and reforms,” said House Speaker John Boehner, an Ohio Republican. “But with only a few months before they’re scheduled to go into effect, President Obama and Senate Democrats have taken no action whatsoever to avert these cuts.”

1 |2 Next »

end quote from: