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Congress heads out as the sequester blows in

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One day before automatic spending cuts were due to hit the Pentagon and other federal agencies, Congress on Thursday abandoned efforts to avert the reductions and left town for the weekend. The sequester is here, and policymakers have no plans to end it.

President Obama is scheduled to meet Friday at the White House with congressional leaders, but expectations for the meeting are low. House Republicans are already turning their attention to the next deadline on March 27, drafting a measure that would avoid a government shutdown while leaving the sequester in place through the end of September.

Administration officials insist that the path to compromise lies in a “balanced” approach that replaces the cuts in part with higher taxes. But among Republicans — even those who admit the sequester will cause pain to the folks back home — the appetite for new taxes is virtually nil.

“Look, the American people will simply not accept replacing spending cuts agreed to by both parties with tax hikes. And I plan to make all of this clear to the president when I meet with him,” Senate Minority Leader Mitch McConnell (R-Ky.) said in a speech on the Senate floor.

Despite a steady drumbeat of dire warnings from the White House about the sequester’s impact on jobs and economic growth, financial markets reacted with a yawn. On Thursday, the Dow Jones industrial average closed down a bit after surging within 25 points of its all-time high, reached in October 2007.

Meanwhile, the Internal Revenue Service announced that it would delay furloughs of agency workers until after the April 15 tax-filing deadline, providing another reason to doubt that the cuts would hit hard and fast enough to change GOP sentiment.

“The sequester is not a good idea. The reality is it’s a terrible idea. As an appropriator, it’s even more terrible to us than to normal people,” said Rep. John Carter (R-Tex.), who oversees homeland security spending on the House Appropriations Committee. Carter’s central Texas district is home to Fort Hood, one of the nation’s largest military bases, and its economy is heavily dependent on government spending.

“But if we don’t face up to these things and lead on this issue, what’s the panic going to look like when we start seeing our entitlement programs collapse around our ears?” Carter said. “It’s hard. But doing the hard thing is the definition of leadership. As Harry Truman said, ‘The buck stops here.’ ”

Administration officials predict Republicans will be more open to compromise once the sequester starts to steal resources from local schools, police forces and businesses that hold contracts with the government. But Republicans say the dynamics of the sequester are fundamentally different from the year-end fiscal cliff, when large numbers of congressional Republicans agreed for the first time in more than two decades to approve significant tax hikes.

In December, the failure to act meant taxes would automatically rise for everyone, an outcome most Republicans opposed. With the sequester, the failure to act means government spending will automatically fall by $85 billion this year — an outcome most Republicans not only desire but promised on the campaign trail.

On Thursday, not a single Senate Republican broke ranks to support a Democratic proposal to replace the sequester in part with higher taxes on households earning more than $5 million a year. The measure won 51 votes but failed to garner the 60 votes needed to avoid a GOP filibuster.

Three Democrats who are up for reelection in 2014 voted against the tax measure. And two other Democrats — Sens. Mark R. Warner (Va.) and Max Baucus (Mont.) — voted for a competing Republican proposal that would keep the sequester in place but give Obama new flexibility to decide where the cuts would fall.

The GOP bill was rejected 62 to 38, with nine Republicans who feared it would afford Obama too much power voting no.

With that, the Senate closed up shop for the week. The House — which made no recent attempt to stop the sequester after adopting two proposals last year to shift the spending cuts from the military to domestic programs — completed its work hours earlier.

So lawmakers left Washington resigned to the idea of letting the cuts take effect sometime before midnight Friday, when the law requires Obama to sign a formal order telling agencies how much to cut from each account.

“Today, Republicans in the Senate faced a choice about how to grow our economy and reduce our deficit. And instead of closing a single tax loophole that benefits the well-off and well-connected, they chose to cut vital services for children, seniors, our men and women in uniform and their families,” Obama said in a statement.

“I believe we should do better,” Obama said, adding that Friday’s meeting at the White House offers an opportunity to chart “a path forward.”

The path seems uncommonly murky, however. Last week, in meetings with liberal activists, administration officials suggested that they hoped to persuade Republicans to cancel the sequester as part of negotiations over the funding bill needed to keep the government open past March 27.

That now appears unlikely. House Republicans announced plans to vote next week on a measure that would keep government funding at sequester levels for the rest of the fiscal year while providing new flexibility to manage the cuts at the Pentagon and the Department of Veterans Affairs.

Obama and Senate Democrats are angling for adjustments to that bill that would make the sequester easier for domestic agencies, as well. But neither the White House nor Senate leaders is threatening to block the House proposal.

“There’s nobody talking about using the [government funding bill] to try to turn off the sequester,” said a senior Democratic aide in the Senate.

After that comes the congressional budget process. House Republicans have said they will keep the sequester savings, which total $1.2 trillion over the next decade. Senate Budget Committee Chairman Patty Murray (D-Wash.) said Thursday that she plans to replace the sequester in her 10-year framework, in part with higher taxes on the wealthy.

Ultimately, the president argues that Washington will have to return to the “grand bargain” that would require Republicans to raise taxes and Democrats to cut the health and retirement programs that account for the biggest portion of government spending. The sequester targets primarily the agency spending that Congress doles out each year and doesn’t touch hot-button “entitlement” programs such as Medicare and Social Security.

But the grand bargain has eluded Obama for more than two years; talks with House Speaker John A. Boehner (R-Ohio) never bore fruit. And even sympathetic Republicans say it’s difficult to see a forum for reopening negotiations.

“How does this movie end? I don’t know,” said Sen. Lindsey O. Graham (R-S.C.), a defense hawk and a champion of the grand bargain who met with Obama this week. “Maybe [lawmakers] will come together after seeing the effects of the sequester on the economy and the Department of Defense.”

Not very hopefully, he added: “Hope springs eternal.”

Paul Kane and David Nakamura contributed to this report.

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