WASHINGTON |
(Reuters) - The U.S. government hurtled on Friday toward deep spending cuts that threaten to hinder the nation's economic recovery, as President Barack Obama met Republican and Democratic leaders at the White House in search of an alternative fiscal plan.
The inflexible plan, locked in during a bout of deficit-reduction fever in 2011, initiates time-released, across-the-board cuts that can only be halted by agreement between Congress and the White House.
That deal has proved elusive so far.
Both sides still hope the other will either be blamed by voters for the cuts or cave in before the worst effects predicted by Democrats - like air traffic chaos or furloughs for hundreds of thousands of federal employees - start to bite in the coming weeks.
Mitch McConnell, the Republican leader in the Senate, all but killed any hopes that Obama and top congressional leaders can hammer out a deal in talks that began shortly after 10 a.m. EST (1500 GMT).
"I'm happy to discuss other ideas to keep our commitment to reducing Washington spending at today's meeting. But there will be no last-minute, back-room deal and absolutely no agreement to increase taxes," McConnell said before the meeting.
Obama huddled at the White House with Senate Majority Leader Harry Reid, McConnell, House of Representatives Speaker John Boehner, the top U.S. Republican, and House Democratic leader Nancy Pelosi.
Barring any breakthroughs, across-the-board cuts totaling $85 billion will begin to come into force at some time before midnight on Friday. The full brunt of the belt tightening, known in Washington as "sequestration," will take effect over seven months so it is not clear if there will be an immediate disruption to public services.
No matter how Obama and Congress resolve the 2013 battle, this round of automatic spending cuts is only one of a decade's worth of annual cuts totaling $1.2 trillion mandated by the sequestration law.
Democrats insist tax increases be part of a solution to ending the automatic cuts, an idea Republicans reject.
Congress can stop the cuts at any time after they start on Friday if the parties agree to that. In the absence of any deal at all, the Pentagon will be forced to slice 13 percent of its budget between now and September 30. Most non-defense programs, from NASA space exploration to federally backed education and law enforcement, face a 9 percent reduction.
If the cuts were to stay in place through September, the administration predicts significant air travel delays due to layoffs of airport security workers and air traffic controllers.
The International Monetary Fund warns that U.S. economic growth could be slowed by 0.5 of a percentage point this year, hitting the global economy.
The non-partisan Congressional Budget Office predicts 750,000 jobs could be lost in 2013 and federal employees throughout the country are looking to trim their own costs.
NO VISITS TO MOVIES, RESTAURANTS
"The kids won't go to the dentist, the kids might not go to the doctor, we won't be spending money in local restaurants, local movie theaters," said Paul O'Connor, president of the Metal Trades Council, which represents some 2,500 workers at the Portsmouth Naval Shipyard in Kittery, Maine.
But some Republicans accused Obama of exaggerating the severity of possible disruptions in government services to force them to call off sequestration on his terms.
The public, Republican Representative Lee Terry of Nebraska said, is "being told ... that Armageddon occurs on Saturday: You're never going to fly, you can't buy any meat at a grocery store, every illegal alien is going to be released, that our borders are going to be overrun by terrorists and al Qaeda will establish themselves in every city of the United States if this goes through."
Terry said Republicans "want the cuts" to trigger, but with more flexibility on how they are carried out.
Even some Republicans keen to rein in government spending are wary of sequestration because of its potential to cause pain. The cuts are designed to hurt by hitting a wide range of government programs regardless of whether cost reduction is warranted.
Instead of these indiscriminate cuts, Obama and Democrats in Congress urge a mix of targeted spending cuts and tax increases on the rich to help tame the growth of a $16.6 trillion national debt.
Republicans want to cut the cost of huge social safety nets, including Social Security and Medicare, that are becoming more expensive in a country with an aging population.
By midnight, Obama is required to issue an order to federal agencies to reduce their budgets, and the White House budget office must send a report to Congress detailing the spending cuts. In coming days, federal agencies are likely to issue 30-day notices to workers who will be laid off.
(Additional reporting by Steve Holland, Thomas Ferraro, Roberta Rampton and Deborah Zabarenko, Writing by Alistair Bell; Editing by Philip Barbara)
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