US & Canada

Sequester deadline looms as US faces $85bn cuts

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Media captionUS President Barack Obama: "Washington didn't make it easy at a time when businesses have began to get some traction"

US political leaders have met for last-ditch talks at the White House, amid the prospect of steep budget cuts.

Cuts worth $85bn (£56bn), originally passed in an effort to push Congress to strike a budget deal, are due to become law by the end of Friday.

President Barack Obama hosted Democratic and Republican leaders, as a blame game rages in Washington. Congress has adjourned for the weekend.

The IMF has said the cuts could have an impact on global growth.

Analysis in the US suggests the nation's GDP (economic output) could grow by just 1.4% in 2013 if the cuts are not delayed or replaced. US GDP grew by 2.2% in 2012.

The White House meeting came as prospects for a deal to avert the cuts, known as the sequester, appeared slim.

"The American people know that Washington has a spending problem," Republican House Speaker John Boehner said as he left the meeting on Friday.

"While there are smarter ways to cut spending than the process that we are about to engage in," he continued, the House would not act before the Senate passed a bill.

He also said tax rises were not an option.

"Let's make it clear that the president got his tax hikes on 1 January," he said. "The discussion about revenue, in my view, is over. It's about taking on the spending problem."

Budget bills from both parties were defeated in the Senate on Thursday.

Although Republicans and Democrats both say they want to reduce the budget deficit, estimated at $845bn this year, the president accused Senate Republicans of allowing the cuts to proceed.

Mr Obama favours what he calls a "balanced" approach to deficit reduction, mixing cuts with tax rises for some Americans.

"They voted to let the entire burden of deficit reduction fall squarely on the middle class," he said of his rivals, in a statement on Thursday.

He criticised Republicans for refusing to close "a single tax loophole that benefits the well-off and well-connected."

The president said that by not doing a budget deal to avoid the cuts, Congress would impose a "self-inflicted wound" on America.

But Republicans contend that the president and his advisers created and proposed the idea of the cuts during budget negotiations in 2011.

'Tumble downward'

Ahead of the Friday morning meeting, reports said Mr Obama was still hoping to push for a wider fiscal deal to reduce the deficit by $1.5tn (£1tn) over the next 10 years.

But attention will also turn to the next congressional challenge - a possible shutdown of the US government if no funding bill is passed in the next month.

The BBC's Mark Mardell in Washington says the cuts are meant to hurt - they were deliberately designed two years ago to be so brutally painful that politicians of left and right would be forced to agree on a better way of balancing the books.

The cuts are split roughly evenly between military and domestic programmes, but effects will be felt over time rather than immediately.

While hundreds of thousands of jobs are expected to be lost, no US government programmes will be closed down entirely. Cuts to healthcare provision for the elderly will be limited.

The scale of cuts will increase gradually over 10 years, totalling $1.1tn by 2023, according to the non-partisan Congressional Budget Office.

If there is no agreement, they are scheduled to be signed into the federal budget by President Obama by 23:59 local time on Friday (04:59 GMT on Saturday).

When Mr Obama signs an order later on Friday, a process to cut the defence budget by 10% and other programmes by 8.5% will be set into motion.

Millions of federal workers could face up to 22 forced days off without pay this year.

Our correspondent says the cuts will not happen overnight - they will be spread over the next seven months and many think Congress will agree to a deal sooner rather than later.

In the Senate on Thursday, a Democratic plan blocked by Republicans proposed nearly $30bn in future cuts in defence spending and a minimum tax rate on incomes exceeding $1m.

Next budget battle

White House spokesman Jay Carney said there were "no preconditions" on what could be discussed in Friday's meeting.

Image caption Airport security queues are expected to get longer once the cuts take place

With Republicans refusing to allow tax rises and Democrats vowing to protect cherished social programmes, Congress is just weeks away from its next budget battle.

On 27 March a temporary federal budget that has kept the federal government running since 2012 is due to expire.

Failure by Congress to enact a new stop-gap budget could see parts of the federal government shut down.

House Republicans have said they will vote on a bill next week to fund the government through the end of the fiscal year, on 30 September, but keep in place some automatic cuts taking effect on Friday.

Meanwhile the International Monetary Fund (IMF) said the global economic recovery could be harmed by the automatic spending cuts.

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