President Obama to ask for short term budget plan

WASHINGTON - President Barack Obama will ask Congress to come up with tens of billions of dollars in short-term spending cuts and tax revenue to put off the automatic across the board cuts that are scheduled to kick in March 1.

Obama will make his request Tuesday afternoon in a public statement at the White House.

The automatic cuts, if they are allowed to proceed, could be a further blow to the weak U.S. economic recovery. They could require widespread layoffs and indiscriminately affect defense programs and domestic spending accounts.

Obama will ask for a targeted way to reduce the deficit in the short term, perhaps several months. White House officials said that Congress needs more time to work out a 10-year plan worth more than $1 trillion in deficit reduction. Obama is not placing a time span or a dollar amount on the short-term plan. Officials said he will leave that to Congress.

Finding deficit reductions of up to $85 billion would put off the automatic cuts, known as a "sequester" in government budget language, until the start of the new fiscal year.

White House officials say the delay will give Congress and the administration time to negotiate a long-term deal through the regular legislative budget process.

The president's request to Congress will come on the same day that the Congressional Budget Office releases new deficit projections that will take into account the fiscal deal Obama and congressional Republicans struck at the start of the new year.

Obama has insisted that any efforts to reduce the deficit be "balanced" between spending cuts and new tax revenue. Obama already won about $600 billion in higher taxes at the start of the year and congressional Republicans say they are not about to approve more tax revenue. While the Senate has a Democratic majority, the House is controlled by the GOP.

In a statement shortly after news of the president's plan emerged, House Speaker John Boehner, R-Ohio, said that additional tax hikes were out of the question.

"President Obama first proposed the sequester and insisted it become law," Boehner said. "Republicans have twice voted to replace these arbitrary cuts with common sense cuts and reforms that protect our national defense. We believe there is a better way to reduce the deficit, but Americans do not support sacrificing real spending cuts for more tax hikes. The president's sequester should be replaced with spending cuts and reforms that will start us on the path to balancing the budget in 10 years."

Senate Majority Leader Harry Reid, D-Nev., has said that a deficit reduction package could include revenue from closing tax loopholes. He has specifically mentioned ending tax breaks for corporate jets and breaks for the oil and gas industry. Such measures, however, would result in modest amounts of revenue. The oil and gas subsidies total about $4 billion a year; the subsidies for purchasers of corporate jets is about $300 million a year.

The automatic cuts are part of a 10-year, $1 trillion deficit reduction plan that was supposed to spur Congress and the administration to act on long-term fiscal policies that would stabilize the nation's debt. Though Congress and the White House have agreed on about $2.6 trillion in cuts and higher taxes since the beginning of 2011, they have been unable to close the deal on their ultimate goal of reducing deficits by about $4 trillion over a decade.

If the automatic cuts are allowed to kick in, they would reduce Pentagon spending by 7 percent and domestic programs by 5 percent. Food stamps and Medicaid would be exempt, but Medicare could take up to a 2 percent reduction, under the plan.

The automatic cuts were supposed to take effect Jan. 1. But Obama and congressional Republicans struck a New Year's deal that extended Bush era tax rates for all but the wealthiest Americans and put in place about $24 billion in deficit reduction. That delay effectively postponed the automatic reductions to March 1.

Obama and White House aides say the president's plan for long-term deficit reduction would increase tax revenue by about $600 billion to $700 billion over 10 years as well as reduce mandatory health care spending, primarily in Medicare, by about $400 billion over the next decade. It would also change an inflation formula that would reduce cost of living adjustments for beneficiaries of government programs, including Social Security.

Republicans have called for a more comprehensive overhaul of government entitlement programs.