CAPITOL HILL— A White House report released Friday details how some $120 billion in cuts to defense and domestic programs next year will be applied starting January 2, 2013, unless Congress takes action to avert the automatic cuts it approved last year. The risky situation many analysts are referring to as the "fiscal cliff."
Senior Obama administration officials told reporters Friday that the report, mandated by Congress, leaves no question that the automatic spending cuts, known as sequestration, would be deeply destructive to national security, domestic investments, and core government functions.
The report outlines that there would be a 9.4 percent cut to most defense programs, except those exempted such as pay for military personnel and veterans' benefits and medical care. There would be an 8.2 percent cut to domestic discretionary programs, including scientific research, food inspection, Education Department programs and border security. Social Security benefits for retired Americans and Medicare health care benefits for older Americans are exempt.
Bipartisan majorities in both the House of Representatives and Senate voted for the threat of sequestration in August of last year, as a mechanism to force Congress to act on further deficit reduction. Now, lawmakers from both major political parties are deeply unhappy about the prospect of the cuts, and are blaming the other party.
"Sequestration, as these cuts are known, threaten our national security, an estimated 200,000 jobs in Virginia will be lost, jobs that our support our war fighters and their mission around the world," said Republican Representative Robert Wittman of Virginia.
Democrats blamed the Republican majority in the House for announcing that the chamber plans to adjourn at the end of next week and to not return until after the November elections.
"Before we adjourn there will be no resolution on the budget, there will be no resolution on the sequester, $1.2 trillion that is causing disruption throughout the country and particularly among the entire federal government, especially the defense industry, which will have to absorb half of that sequester. It could affect directly about a million jobs, almost 2 million jobs indirectly, but we are not going to do anything about it," said Democratic Representative James Moran of Virginia.
Congress has been consumed by battles over government spending and tax cuts for the past two years. Democrats insist that tax increases for top earners must be part of any package to reduce the national deficit. Republicans refuse to include any tax increases, and want deeper cuts to domestic programs such as food stamps for the poor.
Economists are warning that even the threat of spending cuts and tax increases is hurting the U.S. economy.
"This uncertainty about the fiscal cliff coming early next year has reduced risk-taking. Businesses, they don’t want to get out on a limb, over-hiring, buying too much capital, because they don’t know if all of a sudden, at one point in time, that we are going to have an increase in taxes, a decrease in spending, and we would literally go off a cliff," said Bob Costello, the chief economist of the American Trucking Association.
The spending cuts would include cuts of $129 million per year over nine years that were to be allocated for the security, construction, and maintenance of American embassies around the world. In the wake of this week's attacks on U.S. embassies in Libya, Egypt and other countries, lawmakers are likely to strongly reject any cuts to embassy security.
Obama administration officials say the sequester is a blunt instrument that was never intended to go into effect, and they hope the almost 400-page report will motivate lawmakers to bridge their differences to avert devastating cuts.