* Last-minute deal on broad cuts seen unlikely
* IMF says it will have to reevaluate growth forecasts
* Journalist Woodward scraps with White House over issue
By Roberta Rampton and Lesley Wroughton
WASHINGTON, Feb 28 A day before sweeping budget
cuts begin, the White House and Republicans blamed each other on
Thursday for failure to prevent a fiscal crisis which the
International Monetary Fund warned could slow the U.S. and world
Absent a highly unlikely last-ditch deal, the $85 billion in
cuts across federal government agencies start on Friday.
While Democrats and Republicans disagree about how severe
the damage will be to public services like air traffic control
and law enforcement, the IMF said the economic recovery would
likely be harmed by the automatic spending cuts known as
"We will see what happens on Friday, but everybody is
assuming that sequestration is going to take effect," IMF
spokesman William Murray said. "What it means is that we are
going to have to reevaluate our growth forecasts for the United
States and other forecasts," he added.
The full brunt of the automatic cuts will be borne over
seven months and Congress can stop them at any time if the two
parties agree on how to do so.
That makes it difficult to say how the belt tightening will
hit ordinary Americans. President Barack Obama's administration
is warning that Navy ships could lie idle and children would
lose out on vaccinations if the cuts are not halted.
The IMF likely would shave at least 0.5 percentage point off
its 2013 U.S. economic growth forecast of 2 percent if
sequestration is fully implemented.
Put into law in 2011 as part of a bipartisan solution to an
earlier fiscal emergency, sequestration is unloved by both
parties because of the economic pain it will cause.
Few believed two years ago that the cuts would come into
force but, unable to agree on any other way to reduce the budget
deficit, political leaders are pointing fingers at each other
now that the spending reductions appear inevitable.
"It is the president's sequester. It was his team that
insisted upon it," Republican House of Representatives Speaker
John Boehner said.
White House spokesman Jay Carney said Republicans' refusal
to compromise by agreeing to close tax loopholes on the wealthy
was one reason why the cuts might be unavoidable.
"Compromise represents willingness to accept policies that
aren't 100 percent of what you want. The president has done that
again and again. Unfortunately, Republicans seem to be unwilling
to do that when it comes to the sequester, so the sequester may
take place," he told reporters.
Obama wants to end tax breaks for oil and gas companies and
the lower "carried interest" tax rate enjoyed by hedge funds.
Carney said both sides had agreed to the spending cuts, half
of which will come from the defense budget and half from
non-defense domestic programs.
"It was designed as policy that would never come into
effect. Because it was so onerous for both sides, it would
compel Congress to reach a compromise," Carney said.
SOME AMERICANS WELCOME CUTS
Obama will meet congressional leaders in the White House on
Friday for last-minute budget talks but hopes were low for a
"Tomorrow I will bring together leaders from both parties to
discuss a path forward. As a nation, we can't keep lurching from
one manufactured crisis to another. Middle-class families can't
keep paying the price for dysfunction in Washington," Obama said
in a statement.
While Washington politicians have tried to disown any
responsibility for the cuts, recent polls show that many
Americans welcome lower government spending.
An NBC/Wall Street Journal poll released on Wednesday showed
53 percent of Americans preferred the planned cuts or even
greater spending cuts than no cuts at all.
Neil Whitman, 62, who runs Dunhill Staffing, an employment
company based in Mt. Pleasant, South Carolina, said Washington
had just authorized spending of around $60 billion in relief for
"We spent that in a blink of an eye," he said. "You take $85
billion from somewhere else. So what?"
Whitman said he doubted the horror stories emerging from
Washington of public services decimated by sequestration.
"To me, it's political," he said. "I think we need to
control spending, but we need to stop telling the American
people, 'I don't know if we can guarantee your safety on the
But U.S. government workers normally unfazed by political
gridlock are angry that they will be disproportionately hurt.
"It's like a bull's eye," said Jay Matthews, who works in
the chief counsel's office at the Internal Revenue Service in
Washington. "They target us because they think we make too much
money. And they target us because they think we're lazy."
The cuts threaten to puncture the affluence of the U.S.
capital and its suburbs, where incomes and house prices have
benefited from secure government jobs with good salaries. The
area is home to 375,000 federal workers.
Debate over the run-up to sequestration is at the root of a
dispute between the White House and famed Washington journalist
Bob Woodward, who is known for his groundbreaking reporting of
the Watergate scandal in the 1970s.
Woodward this week accused one of Obama's senior economic
officials, Gene Sperling, of threatening him in an email for
reporting that the White House was "moving the goal posts" in
the budget talks.
The Senate voted on Thursday against plans by both Democrats
and Republicans to replace the cuts.
The Republican plan would have let the cuts go into effect
on Friday, but required Obama to submit an alternative $85
billion spending reduction plan to Congress by March 15, thus
allowing more flexibility on how the cuts would be carried out.
The Democratic proposal would have replaced the
across-the-board cuts mainly with tax increases on the rich
coupled with spending cuts. Some of those would be achieved by
eliminating crop subsidies for large agricultural companies.
More savings would be through minor defense cuts in later years.