Deep spending cuts are likely, lawmakers say, with no deal on sequester in sight

The sequester was designed to be abhorrent to both parties. With the exception of a few programs spared by Congress — including Medicaid, Medicare benefits and food stamps — every government account would be sliced by roughly the same amount. Many Republicans were queasy about a projected 9.4 percent reduction in military programs. And many Democrats were alarmed by the prospect of a 8.2 percent cut to Head Start, air-traffic-control operations and community development block grants.

Despite the threat, lawmakers riven by larger ideological differences over taxes and spending have not agreed on an alternative plan to generate $1.2 trillion in savings over the next decade. Late last month, in the throes of negotiations over the “fiscal cliff,” the White House and congressional leaders informed rank-and-file lawmakers that the sequester would kick in on Jan. 2.

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That sparked a furious lobbying campaign by outgoing Defense Secretary Leon E. Panetta, who helped secure a deal to delay the sequester for two months. The White House and congressional leaders agreed to cover half of the $24 billion cost by reducing spending caps even further over the next two years; the other half would come from a tax gimmick that Democrats counted as new revenue.

The agreement eased the impact of the sequester. Instead of lopping nearly $110 billion from agency budgets this year, the cuts will amount to about $85 billion, according to a recent analysis by the Center on Budget and Policy Priorities. Most Pentagon accounts would drop by 7.3 percent, the analysis said, while most domestic agencies would lose 5.1 percent.

Digging in on both sides

But the agreement did little to pave a path for further compromise. Indeed, Obama is now insisting that any fresh debt-reduction measure be evenly balanced between spending cuts and new tax revenue.

On Tuesday, Senate Majority Leader Harry M. Reid (D-Nev.) said Democrats will push to replace the sequester “in short increments” of a few months at a time. But any proposal, he said, “should be a balance of spending cuts and revenue.”

Republicans have ruled out further revenue, saying they will give Obama no more than the roughly $600 billion in new taxes on wealthy Americans that he won in the fiscal cliff talks. Instead, House Budget Committee Chairman Paul Ryan (R-Wis.) said Sunday on NBC’s “Meet the Press” that Republicans will let the sequester kick in, making it easier for them to persuade conservatives to keep the government open when the current funding bill expires March 27.

The sequester “is the only cuts we’ve got right now,” said Sen. John Cornyn (Tex.), the No. 2 Republican in the Senate.

That would clear the legislative decks for a broad ideological fight centered on a budget framework for 2014. Obama is due to deliver his budget request for the coming fiscal year in early March, with Ryan and Senate Democrats expected to follow with their blueprints in the weeks thereafter.

But there is deep anxiety in both parties about how to proceed. In the Senate, Finance Committee Chairman Max Baucus (D-Mont.) is resisting calls from Democratic leaders to raise additional revenue through tax reform. “That has to be resolved,” Baucus said.

And in the House, some veteran GOP lawmakers worry that Ryan’s pledge to wipe out deficits over the next decade will produce a budget so austere it cannot win approval, even among House Republicans — sparking a new internal crisis just as Congress faces its next deadline for raising the federal debt ceiling sometime this summer.

Paul Kane contributed to this report.