No sense of crisis in Congress as automatic cuts loom again

Thu Jan 31, 2013 3:08am EST
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By David Lawder

WASHINGTON (Reuters) - Big automatic cuts in federal spending are fast approaching again, alarming the defense sector but generating little activity in Congress to avoid them.

The cuts, known as a "sequestration," were postponed for two months as part of the legislation that ended the standoff over the "fiscal cliff" on January 1.

But the sense of crisis that accompanied the thought of across-the-board reductions then has all but vanished, replaced by a widespread sense of inevitability.

"I think we're going to have" the cuts "for some period of time, and I think the squeals from constituents will compel some compromise that will emerge in the second half of March," said Steve Bell, economic policy director at the Bipartisan Policy Center and a former Republican House Budget Committee staff director.

The defense industry's concern stems from the fact that half of the $85 billion in spending reductions will come from the budget of the Department of Defense, with the other half hitting a wide array of other government programs.

Outgoing Defense Secretary Leon Panetta as well as his designated successor, Chuck Hagel, have warned that the cuts will impair military readiness.

Congress' lack of urgency as it hurtles toward the launch of spending reductions on March 1 may be affected by Wednesday's news that the U.S. economy contracted in the fourth quarter.

The GDP report showed government spending tumbled at a 6.6 percent rate, with defense outlays plunging at a 22.2 percent pace, the largest drop since the third quarter of 1972.   Continued...

U.S. President Barack Obama delivers remarks next to Vice President Joe Biden (L) after the House of Representatives acted on legislation intended to avoid the "fiscal cliff," at the White House in Washington January 1, 2013. REUTERS/Jonathan Ernst