US & Canada

Obama warns budget cuts will cause job losses

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Media captionPresident Obama said Republicans would rather impose cuts than close a "single tax loophole"

US President Barack Obama has warned Congress "people will lose their jobs" if deep budget cuts are allowed to take effect next week.

Mr Obama said $85bn (£55bn) in cuts was a harmful, "meat-cleaver approach" to deficit reduction, as he stood with emergency workers at the White House.

He also offered targeted spending cuts, supporting a proposal similar to that outlined by Senate Democrats last week.

Mr Obama has just returned from a three-day golf trip in Florida.

Fresh from his weekend round of golf with Tiger Woods, the president said: "These cuts are not smart, they are not fair, they will hurt the economy. This is not an abstraction. People will lose their jobs."

'Blocking tax reform'

The president added that the effect of the so-called sequester, as the raft of budget cuts are known in Washington DC, was already being felt in some government departments, noting the Navy had delayed the deployment of a carrier to the Gulf.

"Changes like this, not well thought through, not phased in properly, changes like this affect our ability to respond to threats in unstable parts of the world," Mr Obama said.

He also said that while he was open to cutting back on unsuccessful or unnecessary government programmes, he accused Republicans of "ideological rigidity" for opposing tax increases.

He proposed closing some tax loopholes to increase revenue, and backed a budget plan put together by Senate Democrats last week.

Mr Obama said the deep, across-the-board spending cuts had originally been designed to be so unattractive that they would spur politicians to work together.

Congressional Republicans have given a frosty reception to the Senate Democrats' proposal.

They point out that Mr Obama already won a revenue increase in the new year, when Congress allowed taxes to rise on families making more than $450,000 annually.

In response to the president's remarks, House Speaker John Boehner said: "The American people understand that the revenue debate is now closed.

"Tax reform is a once-in-a generation opportunity to boost job creation in America. It should not be squandered to enable more Washington spending. Spending is the problem, spending must be the focus," he said in a statement.

Congress is in recess this week, leaving little time to negotiate a budget solution ahead of the 1 March deadline.

Senate plan

Democrats have suggested increasing revenues by closing some tax loopholes, including tax breaks for the oil and natural gas industry, for businesses that have outsourced labour from the US, and ensuring millionaires pay a tax rate of at least 30%.

The Democratic plan does not include any changes to costly federal programmes such as the Medicare healthcare programme for over-65s and the Social Security pension programme.

Many Republicans have supported closing some loopholes, but they say the changes should be part of a broader overhaul of the tax code, not a way to plug gaps in the budget.

The "sequester" was originally due to take effect on 1 January, along with a series of other measures known as the fiscal cliff.

But, amid dire warnings that the package of across-the-board spending cuts and tax increases could tip the US back into recession, lawmakers pushed back the spending cuts by two months, saying the delay would give them time to shape a larger budget deal.

Little progress on such a plan has been seen in recent weeks.

Also on Tuesday, a bipartisan proposal from the co-chairs of a deficit-reduction committee recommended the government find savings of $2.4tn over the next 10 years.

The proposal from former Republican Senator Alan Simpson and Democrat Erskine Bowles, President Bill Clinton's former chief of staff, suggests taking about a quarter of savings from changes to healthcare programmes and another quarter from new revenue from tax changes.

They have said the mandatory cuts are too steep and would damage the economy.

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