Billions in 'sequester' budget cuts looming in U.S.

Sweeping U.S. government spending cuts totalling $85 billion US begin taking effect Friday, slicing deeply into military and other programs in an unwanted move toward austerity that displays Washington's paralyzing partisan divisions.

A White House spokesman said the cuts would be put into force as close to midnight as possible because President Barack Obama was "ever hopeful" on a deal to avoid them.

Obama was meeting congressional leaders of both parties Friday morning, but there were no expectations of a breakthrough. "There will be no last-minute, back-room deal and absolutely no agreement to increase taxes," Senate Minority Leader Mitch McConnell, a top Republican, said in a statement Friday morning

The cuts are kicking in after the White House and congressional Republicans could not overcome bitter disagreements and come up with a better plan to tackle the country's $11.7 trillion debt. The warring sides have spent this week assigning blame rather than seeking a way out.

U.S. Speaker of the House John Boehner said President Barack Obama and Democrats in the Senate are "demanding more tax hikes to fuel more 'stimulus' spending." (Alex Wong/Getty Images)

The automatic spending reductions — part of a law passed two years ago — are designed to be so off-putting to both Democrats and Republicans as to force a compromise. It hasn't worked.

The immediate impact of the cuts on the public was uncertain. They would carve five per cent from domestic agencies and eight per cent from the Pentagon between now and Oct. 1 but would leave several major programs alone, including the Social Security pension program, the Medicaid health care program for the poor and food stamps.

But the cuts are just the first of a series of budget crises that will confront Congress and the White House before summer.

Friday's talks will look past the automatic spending cuts to the next looming fiscal fight: a possible government shutdown. The annual ritual of passing agency spending bills collapsed entirely last year, and Congress must act by March 27 to prevent the partial shutdown.

Then, in April, Congress will confront a renewed standoff on increasing the government's borrowing limit — the same issue that, two years ago, spawned the law forcing the current spending cuts in the first place.

Failure to raise the borrowing limit could force the U.S. to default on debt for the first time in its history.

So entrenched are the two parties that chaplain Barry Black opened the Senate session Thursday with a prayer that beseeched a higher power to intervene.

"Rise up, O God, and save us from ourselves," he said.

Thursday's efforts thwarted

Agency leaders for weeks have warned what would happen when the cuts take effect: The busiest airports could close some runways, causing widespread flight delays and cancellations. Hundreds of illegal immigrants already have been freed from jail across the country. One military aircraft carrier's tour of duty to the Persian Gulf has been delayed.

Democrats on Thursday thwarted a Republican proposal that would have required Obama to propose alternative cuts that would cause less disruption in essential government services. Moments later, a Democratic alternative to spread the cuts over a decade and replace half with higher taxes on millionaires and corporations met the same fate.

In a written statement after the votes, Obama lambasted Republicans. "They voted to let the entire burden of deficit reduction fall squarely on the middle class," he said.

Said House Speaker John Boehner, the top Republican in Congress: "Obama and Senate Democrats are demanding more tax hikes to fuel more 'stimulus' spending."

Many conservatives are willing to accept the cuts as the only way to reduce government spending, even though the budget knife cuts into cherished defence programs.

U.S. President Barack Obama is set to meet with congressional leaders today in a last-ditch effort to reach a compromise. (Steve Helber/Associated Press)

Some Republicans held out hope the current struggle might lead to talks on completing work on the final piece of a deficit reduction package that has been more than two agonizing years in the making. The opposition party wants to overhaul the U.S. tax law and win reductions in social safety net programs, the federal pension system and medical insurance for Americans of retirement age and health care for the poor.

Obama and some Democrats are willing to see some small alterations to those programs but nothing on the scale sought by Republicans. And the Democrats want to raise taxes on the wealthy to, in part, fund new or expanded government programs. Republicans want any increase in tax revenue to go straight toward reducing the debt.

In a cycle of crisis followed by compromise over the past two years, Obama and congressional Republicans have agreed to more than $3.6 trillion in long-term deficit savings over a decade. While much of that has come from spending restraint, Republicans allowed legislation to pass late last year that raised taxes on upper-income Americans by $600 million.

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