The Obama administration, in a politically charged report released less than two months before the election, catalogued $1.2 trillion in looming spending cuts that it said would be “devastating” to federal programs.
The White House Office of Management and Budget said in the report to Congress Friday that it would have to chop $109 billion from the budget in fiscal 2013, split evenly with $54.7 billion coming from defense and $54.7 billion from programs outside defense. It includes an $11 billion cut, or 2 percent, from Medicare, that would fall on providers.
Spending cuts would undermine economic investment, and “cause severe harm” by reducing food-safety inspections, air traffic controllers, medical research and support for schools, the report said. It also would force the Pentagon to juggle accounts to maintain current war-fighting capabilities and delay repairing or buying new equipment.
Taxes, spending and the federal budget deficit are among the central issues in the election contest between President Barack Obama and Republican Mitt Romney. Obama is pressing to raise taxes on the wealthiest Americans to help pay for government programs. Romney argues that doing so would hit small businesses and hurt job creation at a time when the unemployment rate has been above eight percent for 43 months.
The deficit this year is projected to reach $1.1 trillion, which would make it the fourth consecutive year the government has run trillion-dollar shortfalls. That has contributed to a recent run-up in the federal debt, which has climbed more than 75 percent in the past four years.
At $11.3 trillion, or 73 percent of the nation’s gross domestic product, the publicly held debt this year is projected to reach the highest level since shortly after World War II. Moody’s Investors Service warned earlier this week it may join Standard & Poor’s in downgrading the U.S.’s credit rating if lawmakers don’t agree next year on a deficit-reduction plan.
Obama’s budget advisers, in the almost 400-page report, said the reductions would affect more than 1,200 budget accounts and blamed Republicans in Congress for focusing strictly on spending cuts.
The budget resolutions put forward by House Republicans “represent particularly irresponsible approaches to addressing sequestration” by refusing to raise taxes for the top 2 percent of earners, the report said.
“These proposals would shift the burden of deficit reduction onto the middle-class and vulnerable populations and represent the wrong choices for the nation’s long-term growth and prosperity,” it said.
House Republicans endorsed a plan in May that would replace much of next year’s cuts with savings carved out of food stamps, Medicaid, federal workers’ benefits, the Consumer Financial Protection Bureau and other spending programs. They would allow some of the scheduled cuts to take effect, such as the 2 percent reduction in Medicare.
The budget office said the calculations were preliminary and subject to change. Even so, the report said there’s “no question” that paring the budget to this degree “would be deeply destructive to national security, domestic investments and core government functions.”
For example, the Federal Aviation Administration’s 2013 budget would be cut by $1 billion, according to the report. That would force the agency to reduce service at some airports and may cause a drop in airline travel of as much as 10 percent, according to a study released last month by the Aerospace Industries Association, an Arlington, Virginia-based trade group.
The $21.3 billion aircraft procurement request from the Air Force would be cut $2 billion, hitting top aircraft and electronics makers Lockheed Martin Corp., Boeing Co., Northrop Grumman Corp., Raytheon Co. and L-3 Communications Holdings Inc.
Similarly, the Navy’s $22.7 billion Shipbuilding and Conversion account would be cut by $2.1 billion, trims that would affect top builders Huntington Ingalls Industries Inc. and General Dynamics Corp.
The automatic across-the-board cuts, known as sequestration would begin on Jan. 2 unless Congress adopts an alternative and would come each year through 2021. The sequestration is intended as a punitive step lawmakers imposed upon themselves for failing in 2011 to negotiate a deal to cut deficits by at least $1.2 trillion over a decade.
Today’s report, “highlights the crippling effect these reductions will have on our nation’s security and underscores the urgent need for the President to work with congressional Republicans to replace these destructive cuts,” said Senate Minority Leader Mitch McConnell, a Kentucky Republican.
While the law calls for $1.2 trillion in reductions over the next nine years, the real cuts amount to $984 billion. That’s because it allows lawmakers to chalk up 18 percent of those savings to reduced interest payments on the debt, which today’s report shows would amount to $216 billion.
The sequestration would impose a 9.4 percent cut in defense discretionary spending, and an 8.2 percent reduction in nondefense discretionary accounts, according to the report. Nondefense mandatory programs would take a 7.6 percent hit and defense-related mandatory programs would be slashed by 10 percent.
The administration, which is charged with implementing the so-called sequester, emphasized the law gives it little discretion in apportioning the cuts.
“With the single exception of military personnel accounts, the administration cannot choose which programs to exempt, or what percentage cuts to apply,” the report says. “These matters are dictated by a detailed statutory scheme.”
For the Pentagon, the reductions would not affect the war effort, the report said. Still, the cuts “would result in a reduction in readiness of many non-deployed units, delays in investments in new equipment and facilities, cutbacks in equipment repairs, declines in military research and development efforts, and reductions in base services for military families.”
Spending in some federal programs is exempt. Lawmakers put certain mandatory programs such as Social Security off limits, and the administration has said military pay and veterans’ health-care programs should be left alone. Other programs, such as student loans, are subject to special rules.
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