11/21/2011 @ 6:08PM |3,939 views
Obama: I Will Veto Attempts To Get Rid Of Automatic Spending Cuts
Obama, in clear campaign mode - art_es_anna via Flickr
President Barack Obama gave a press conference after the Supercommittee officially admitted it failed to reach an agreement to cut $1.2 trillion in budget spending over the next 10 years. Obama told reporters he would veto any attempt to get rid of the automatic cuts which are set to kick in as a part of the sequester proposition, which will be triggered unless Congress reaches over the next year.
Asking Congress to “work with a scalpel, not with a hatchet,” President Obama sought to provide the people, and markets, with a little hope. Despite the Supercommittee failing to agree on spending cuts for $1.2 trillion, Obama noted there’s still a year before automatic cuts kick in.
The sequester proposition, which will trigger $1.2 trillion in cuts in defense and domestic spending, in equal parts, will kick in if Congress doesn’t get its act together over the next 12 months, the President said. Obama had his game face on, and took on Republicans asking them to work as hard to defend tax cuts to small businesses and middle class Americans as they did to defend tax cuts for the rich.
Threatening a veto, Obama asked Congress to reach a bi-partisan solution that would put the country’s debt situation on a sustainable path to recovery. “I will veto any effort to get rid of those automatic spending cuts,” said Obama from the White House’s briefing room, adding “the only way to get rid of those cuts is to get Congress to come together and work on a deal.”
U.S. stocks plummeted on Monday in anticipation to the Supercommittee’s failure, along with gold and oil, while Treasuries rallied. Standard & Poor’s, which had downgraded the U.S. after the first round of budget debates, noted the Supercommittee’s failure was already factored into its calculations, adding that the country’s AA+ credit rating was not under pressure. “However, we expect the caps on discretionary spending as laid out in the Budget Control Act of 2011 to remain in force. If these limits are eased, downward pressure on the ratings could build.”
While the U.S. counts with a high debt-to-GDP ratio, the economy is recovering at a decent pace compared to other so-called advanced nations. While Europe is on the brink of falling into recession, the U.S. recorded 2.5% annualized GDP growth in the third quarter. Economists at Goldman Sachs, JPMorgan, and Nomura agree that the recovery will lose steam in 2012 as fiscal stimulus withers, putting pressure on Fed Chairman Ben Bernanke to take the lead and provide monetary stimulus in the form of QE3.
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Mr. Fontevecchia,
What I am trying to figure out if Mr. Obama maneuvered for this outcome a year ago or not. If you will recall the Democrats in Congress had proposed a bill to extend Unemployment Insurance. The Republicans threatened to block this bill if an other bill extending certain tax cuts to the wealthy which were set to expire were not extended. A compromise was reached an both bills were passed.
At the time many people wondered if Mr. Obama had not been “played”. Increasing spending while cutting taxes was certain drive the deficit to record levels. Surely the Republicans would use this as a political cudgel to pummel Mr. Obama and the Democrats when the next budget cycle came around. It was hard to understand what the Democrats were thinking.
This is of course exactly what happened in August last when the Republicans forced the Democrats and Mr. Obama to agree to these massive cuts and the “Super Committee”. It appeared that the Administration had been beaten badly.
Now however, after the abject failure of the Super Committee is forcing “sequestration” of funds for pet programs of the Republicans, most notably military spending programs, the Republicans are now looking foolish and / or hypocritical. They are proposing to un-sequester some or all of the effected programs. This of course shows the Republicans were never serious about cutting spending in the first place. Mr. Obama now has them over a barrel. He is not going to let them back out of their own tar pit. They will be entering the 2012 election cycle looking pretty foolish. All of their insincere bluster about balancing the budget will be exposed. He can position himself as the “real budget balancer”* while the Republicans appear to be mere posers.
So the question is, did he plan out this during the discussion on the extension of Unemployment Insurance or did he just scramble really well?
*if that was not a word before, it is now I suppose.
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Interesting analysis David, I like to think truth lies between extremes, and thinking Obama is a genius is no more of an extreme than thinking he got lucky. Obama is clearly the only Democrat in charge and he appears to blend a powerful rhetoric which appears always on the offensive with a pragmatic approach to policy.
The Republican camp itself is pretty divided, only unified in their antagonism with Obama and any powerful Democrats (Pelosi, Reid). The challenge for Obama, and Washington, now seems to me to be finding how to raise revenue without screwing up the balance too much.
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Mr. Fontevecchia,
I certainly do not know myself but Mr. Obama certainly has them over a barrel. They did not really want to make the cuts that they are now responsible for and the President does not appear to willing to pull them back across the barrel without some meaningful budget concessions.
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Here is a brief explanation of the Budget Control Act of 2011 which will kick in if Congress cannot reach agreement on budget cuts:
http://viableopposition.blogspot.com/2011/11/budget-control-act-primer.html
The Budget Control Act is projected to save less than $1 trillion over 10 years, an insignificant saving considering that Washington increased the country’s debt by over $4 trillion in the last 3 fiscal years alone.
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Hello normaward,
The key point here is that Republicans do not want to cut even that much. That is why they are talking about “unsequestering” the sequestered funds and even raising taxes. They do not want to do into an election year as the party that cut any popular government program (you chose). This is also why Mr. Obama is going to veto any effort to back out of the sequestration process, i.e. without some things that he wants in return.
