* Obama to host congressional leaders at White House
* Stalemate persists ahead of Friday deadline
* White House denies ordering release of illegal immigrants
By Jeff Mason and Steve Holland
WASHINGTON, Feb 27 Positions hardened on
Wednesday between President Barack Obama and Republican
congressional leaders over the budget crisis even as they
arranged to hold last-ditch talks to prevent harsh automatic
spending cuts beginning this week.
Looking resigned to the $85-billion in "sequestration" cuts
starting on Friday, government agencies began reducing costs and
spelling out to employees how furloughs will work.
Expectations were low that a White House meeting on Friday
between Obama and congressional leaders, including Republican
foes, would produce any deal to avoid the cuts.
Public services across the country - from air traffic
control to food safety inspections and education - might be
disrupted if the cuts go ahead.
Put into law in 2011 as part of an earlier fiscal crisis,
sequestration is unloved by both parties because of the economic
pain it will cause, but the politicians cannot agree how to stop
A deal in Congress on less drastic spending cuts, perhaps
with tax increases too, is needed by Friday to halt the
sequestration reductions which are split between social programs
cherished by Democrats and defense spending championed by
Obama stuck by his demand that Republicans accept tax
increases in the form of eliminating tax loopholes enjoyed
mostly by the wealthy as part of a balanced approach to avoiding
"There is no alternative in the president's mind to
balance," White House spokesman Jay Carney told reporters.
Obama wants to end tax breaks for oil and gas companies and
the lower "carried interest" tax rate enjoyed by hedge funds.
But Republicans who reluctantly agreed to raise income tax
rates on the rich to avert the "fiscal cliff" crisis in December
are in no mood for that.
"One thing Americans simply will not accept is another tax
increase to replace spending reductions we already agreed to,"
said Senate Republican leader Mitch McConnell.
In one of the first concrete effects of the cuts, the
administration took the unusual step of freeing several hundred
detained illegal immigrants because of the cost of holding them.
Republicans described that move by Immigration and Customs
Enforcement as a political stunt aimed at scaring them into
agreeing to end the sequestration on Obama's terms.
The issue looked like it might become more controversial on
Wednesday when The Associated Press reported that the Homeland
Security Department official in charge of immigration
enforcement and removal had announced his resignation on Tuesday
just after news of the immigrants' releases came out.
But ICE said the report was "misleading." The official, Gary
Mead, told ICE weeks ago of his retirement in April after 40
years of federal service, a spokeswoman said. Earlier, Carney
denied the White House had ordered the immigrants' release.
Friday's White House meeting will include McConnell and the
other key congressional leaders: Senate Democratic leader Harry
Reid, House of Representatives Democratic leader Nancy Pelosi,
and House Speaker John Boehner, the top U.S. Republican.
But the chances of success were not high.
One congressional Republican aide criticized the White House
for calling the meeting for the day the cuts were coming into
effect. "Either someone needs to buy the White House a calendar,
or this is just a - belated - farce. They ought to at least
pretend to try."
Unlike during other fiscal fights in Congress, the stock
market is taking the sequestration impasse calmly.
U.S. stocks rose, with major indexes posting their best
daily gains since early January, as Federal Reserve Chairman Ben
Bernanke remained steadfast in supporting the Fed's stimulus
policy and data pointed to economic improvement.
Obama chatted briefly with McConnell and other congressional
leaders at the unveiling of a statute for civil rights pioneer
Rosa Parks on Capitol Hill.
Americans blame both Obama and congressional Republicans for
this latest fiscal crisis, according to a Reuters/Ipsos online
poll released on Tuesday.
Twenty-five percent of people said Republicans in Congress
were responsible for sequestration, 23 percent blamed Obama and
5 percent pointed to congressional Democrats. Thirty percent
said all of them were to blame.
Federal Reserve Chairman Ben Bernanke said sequestration was
too drastic an approach for reducing the budget deficit.
"What I am advising is a more gradual approach. I'm not
saying we should ignore the deficit, I am not saying we
shouldn't deal with long-term fiscal issues, but I think that
from the perspective of our recovery, a more gradual approach
would be constructive," he told a House Financial Services
Among many warnings from the Obama administration of
possible damage to public services, the Air Force said its
Thunderbirds exhibition flying team is expected to be grounded
if sequestration happens.
The Pentagon will put most of its 800,000 civilian employees
on unpaid leave for 22 days, slash ship and aircraft maintenance
and curtail training.
But the full weight of sequestration will take place over
seven months, allowing Obama and the Republicans time to work
out a deal after the cuts begin this week.
White House spokesman Carney said sequestration would
officially start just before midnight on Friday night if no deal
Government agencies began to tell employees how
sequestration will force them to take furloughs. The
Environmental Protection Agency acting head, Bob Perciasepe,
told employees in an email that the agency did not know how much
of its budget will be cut but it was working on an estimate of 5
"What might that mean for our employees? If the sequester
order requires a 5.0% cut, the impact could be up to 13 furlough
days," he said. That would likely mean four furlough days by
June 1, he said.
Education Secretary Arne Duncan said as many as 40,000
teachers would eventually lose their jobs under the cuts. School
districts heavily dependent on federal aid would have to decide
as early as next week whether to lay off teachers or cut the
number of school days.