Obama demands sequester delay

President Obama on Tuesday demanded that Congress approve legislation to replace at least some of the $85 billion in automatic spending cuts set to hit the government on March 1.

Obama offered no concrete plan on how to replace the cuts, but warned that if Congress allowed them to go forward, it would hurt the economy. 

“We have seen the effects that political dysfunction can have,” said Obama. “It will cost us jobs and hurt our economy.”

{mosads}The president said the cuts should be replaced by both spending cuts and tax hikes, calling on Congress to agree to a “balanced mix of spending cuts and more tax reform” that would at least delay sequestration for a “few months.”  

“If they can’t get a bigger package done by the time the sequester is scheduled to go into effect, then I believe they should at least pass a smaller package,” Obama said. “There is no reason that the jobs of thousands of Americans who work in national security or education or clean energy — not to mention the growth of the entire economy — should be put in jeopardy.”

But Obama also shifted his tone on the likelihood that the cuts will take place. 

During a presidential debate with GOP nominee Mitt Romney last fall, Obama said the sequester “will not happen,” but on Tuesday he said it “doesn’t have to happen.”

With a little more than three weeks to go until the cuts begin, Obama’s statement from the White House did little to move negotiations forward on a possible sequester replacement. 

Congressional Republicans immediately rejected Obama’s call for tax increases and said bipartisan cuts can easily be found to replace the sequester.

The back-and-forth raised questions about whether Obama and Republicans are even intent on getting a deal, or whether they are more concerned about who will be blamed if sequestration goes forward. 

Speaker John Boehner (R-Ohio), who has said he will no longer negotiate with Obama on a deficit-reduction package, in a statement released before Obama’s comments emphasized that it was the White House that first proposed the sequester and that Republicans had twice voted to replace the “arbitrary cuts” with common-sense spending cuts. 

“We believe there is a better way to reduce the deficit, but Americans do not support sacrificing real spending cuts for more tax hikes,” Boehner said.

Obama for his part criticized GOP calls for spending cuts, saying: “We can’t just cut our way to prosperity.”

The Congressional Budget Office on Tuesday estimated that allowing the sequestration cuts to go forward would lead to a 0.7 percent decline in the growth of gross domestic product this year, while the Bipartisan Policy Institute has said the cuts could cost the nation 1 million jobs this year. Some defense firms have warned of even larger job losses. 

A report last week from the Commerce Department also highlighted the potential damage, finding reductions in defense spending led to a 0.1 percent contraction in the economy at the end of last year. 

The White House and Democrats have long believed that the very threat of defense cuts would bring Republicans to the table. But a vocal segment of Republican lawmakers have been calling for overall cuts — not just defense spending. On the other hand, Republicans don’t want to be seen, yet again, as the perceived obstacle in reaching a deal.

The president said proposals he made to reduce entitlement benefits in talks in December with Boehner “are still on the table,” a sentiment he repeated twice in his remarks on Tuesday. Obama agreed in those talks to change the way costs would be adjusted for inflation in government programs, including Social Security and Medicare, in exchange for hundreds of billions of dollars in additional revenue from closing tax loopholes.  

But those talks broke down over differences between Obama and Republicans over what would constitute a “balanced approach” to reducing the deficit. 

Republicans argue Obama and Democrats have stubbornly refused to agree to meaningful reductions in entitlement spending, which they argue are the biggest drivers of the deficit. They say the White House must agree to spending cuts and entitlement reforms, especially after a “fiscal cliff” deal in January raised taxes on wealthier households. 

Obama and Democrats said any spending cuts must be coupled with additional tax hikes, particularly by eliminating tax breaks for the wealthy and businesses. 

In response to Obama’s comments, three Republican senators promised to introduce legislation that would replace this year’s sequestration cuts to the Pentagon by reducing the size of the federal workforce through attrition. 

“While the president last year promised that sequestration ‘will not happen,’ he has declined to address this looming crisis for more than a year,” Sens. John McCain (Ariz.), Lindsey Graham (S.C.) and Kelly Ayotte (N.H.) said in a statement. 

“In the coming days, we will be introducing legislation — as we did last year — to avoid the first year of defense budget cuts by reducing the size of the federal workforce though attrition as recommended by the Simpson-Bowles Commission. This common-sense approach avoids a damaging self-inflicted wound to America’s security, and we hope the president will join us in this effort,” they said.

Senate Democrats, who are meeting at a retreat this week, are discussing a mix of tax increases and possible spending cuts to replace the sequester.  Obama will attend the retreat on Wednesday.

The top House and Senate Republicans on the Armed Services committees, Rep. Buck McKeon (R-Calif.) and Sen. James Inhofe (R-Okla.), said in a joint statement Obama’s proposal is “better late than never.” 

But they have little optimism for the details of his plan.

“Refusing to consider reforms to the mandatory spending that is driving our debt crisis, while using our troops as a piggy bank to keep unsustainable spending programs on life support, will have both fiscal and strategic consequences,” the two said.

— Jeremy Herb contributed.

— Updated at 8:20 p.m.