Obama forced into £57bn cuts as tax talks fail

Barack Obama blames the Republicans for the cuts. Picture: Reuters
Barack Obama blames the Republicans for the cuts. Picture: Reuters
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President Barack Obama was signing into law an unprecedented $85 billion (£57bn) of federal budget cuts last night after the failure of last-ditch talks with congressional leaders to try to avert the so-called sequestration crisis.

Mr Obama wasted no time in blaming Republicans for the “dumb, arbitrary” cutbacks that he said were forced on the American people by politicians who he said chose to protect tax breaks for the wealthy instead of finding a solution to the country’s spiralling national deficit.

“None of this is necessary,” he said after his meeting at the White House with, among others, Mitch McConnell and John Boehner, leaders of the respective Republican factions in the US Senate and House of Representatives.

“They’ve allowed these cuts to happen because they refuse to budge on closing a single wasteful loophole to help reduce the deficit. They decided to protect special interest tax breaks for the well-off and the 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 warned that tens of thousands of federal employees could be laid off because of a “series of dumb, arbitrary cuts to things that workers depend on, like education, research, infrastructure and defence”.

With Congress having concluded its business for the week on Thursday, there was never any real prospect that yesterday’s meeting would bring immediate relief to a crisis that has been looming since the “fiscal cliff” compromise in January.

Then, politicians voted to head off massive automatic tax increases for the middle class that would have kicked in on New Year’s Day, but effectively delayed tackling the $16.2 trillion (£10.8tn) national debt until this latest round of deadlocked budget talks.

Without a deal between the Obama administration and Congress, the first round of sequester cuts was enacted at midnight.

“Republicans have offered the president numerous solutions, including the flexibility he needs to secure those reductions more intelligently,” Senator McConnell said in a statement before meeting Mr Obama yesterday.

Mr Boehner, was equally blunt. “The discussion about revenue in my view is over. It’s about taking on the spending problem here in Washington.”

The effects of the cuts, which will hit every government department, were already being felt before today’s deadline. The Immigration and Customs Enforcement Agency came under fire for releasing hundreds of illegal immigrants because it said it could no longer afford to house them. Lay-off notices have already been sent out to thousands of federal employees.

Transport secretary Ray LaHood said 100 airport control towers, could close while analysts have warned of long queues at security checkpoints.

Almost half of the cuts, about $40bn, will come from the defence budget.

Politicians will resume discussions next week and need to have some kind of deal in place by 27 March, when some departments are projected to run out of money and will shut down.