US lawmakers voted on Wednesday to give the White House 30 days to explain how it will deal with US$1 trillion in spending cuts set to kick in next year, as the defence industry warned the impact would be devastating.
A rarely united House of Representatives voted 414-2 in favour of the bill that would require President Barack Obama to provide details on how his administration would slash $109 billion from military and domestic programmes in 2013 alone, putting pressure on the Democrat-led Senate to do the same. Pressing the administration to address the issue "will hopefully incentivize all stakeholders to find a solution as soon as possible," said Republican Buck McKeon, chairman of the powerful House Armed Services Committee that presides over defence appropriations.
A 10-year, $1 trillion slash in military and domestic spending, known as a sequester and written into last year's Budget Control Act as part of the deal in Congress to raise the debt limit, was designed to be so painful that both sides would do whatever was necessary to avoid such automatic cuts.
Those cuts are in addition to the $487 billion in Pentagon cuts over the next decade that Congress already committed to making.
With less than four months before the general election and half a year before the January 2 deadline, Republicans and Democrats are deeply divided by how to further reduce the deficit and avoid what lawmakers have come to call the "fiscal cliff."
Even after fierce debate over the debt ceiling brought the United States to the brink of default and led to the first-ever US credit rating downgrade, Congress failed to reach a deal in time to reduce the long-term deficit by $1.2 trillion.
A precarious reckoning now faces Americans in early January if Congress does not act, with all Bush-era tax cuts set to expire and substantial defence and civilian cuts kicking in.
Obama is calling for an end to the tax cuts for those making over $250,000 per year, while Republicans want to keep the tax breaks for everyone.
The Congressional Budget Office has warned that inaction could send the nation into recession. Analysts and industry reports say barrelling over the fiscal cliff could cost between 700,000 and 2.1 million jobs.
Defence Secretary Leon Panetta has warned that the sequester would do "catastrophic damage" to the US military, and Republican senators invoked Panetta's warning.
Senator John Thune said he feared the Obama administration would make "draconian and dangerous cuts" to the military budget, and encouraged his fellow senators to pass a version of the House bill. Republican leaders made it clear their aim was to expose Obama and his Democrats as ready to plunge off the fiscal cliff rather than working out a compromise on spending.
Senate minority leader Mitch McConnell said it was "deeply irresponsible" to delay debate over how to introduce target cuts to military and non-defence spending, and said the issue should not be left for the lame-duck period after November's election.
"We must deal with defence sequestration prior to the election," he said. Democratic Senator Carl Levin said he believed that was possible, and noted that a number of Republicans "have crossed the rubicon on revenues" and may agree to closing tax loopholes, which could save $155 billion over 10 years.
At a House Armed Services Committee hearing, chief executives warned that the threat of massive cuts was already having a "chilling effect" on the defence industry.
"If sequestration happens, it will be a blunt-force trauma to industry and to America," Robert Stevens, chairman and chief executive of major US defence contractor Lockheed Martin, told the hearing.
"We're concerned that it will tear the fabric of the supply chain, the industrial base and our national security in significant and irreparable ways."
David Hess, president of Pratt&Whitney, told lawmakers that contractors were already "limiting hiring and halting investments" as a result of the fog of uncertainty surrounding sequestration.
But he acknowledged that lawmakers ought to consider solutions from all sources including revenue.
"I think everything's got to be on the table at this point now," he said. -- AFP