WASHINGTON (AFP) - President Barack Obama Tuesday called for stop-gap spending curbs and tax reforms to avert multi-billion dollar budget cuts due to hammer the economy on March 1, but hit a Republican brick wall.
Mr Obama warned the fragile economy could not afford the blow from huge cuts to defence and other government programmes, known as the sequester, and the jobs of millions of Americans should not be threatened by wrangling in Washington.
The president said if Congress could not act on a bigger deficit cutting package by March 1, lawmakers should pass a smaller plan of spending cuts and tax reforms to forestall the economically damaging impact of the sequester.
"There is no reason that the jobs of thousands of Americans who work in national security or education or clean energy, not to mention the growth of the entire economy, should be put in jeopardy," Mr Obama told reporters. "Let me repeat, our economy right now is headed in the right direction. It will stay that way as long as there aren't any more self-inflicted wounds coming out of Washington."
House Republican Speaker John Boehner, wading into yet another tax and spending row with Mr Obama, ruled out any compromise that involved higher taxes, after submitting for the president's call for more taxes on the rich last year.
"We believe there is a better way to reduce the deficit, but Americans do not support sacrificing real spending cuts for more tax hikes," Mr Boehner said in a statement.
"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 Republican minority leader Mitch McConnell also warned that Americans would "not support more tax hikes in place of the meaningful spending reductions both parties already agreed to and the President signed into law."
The Congressional Budget Office reported on Tuesday that if the sequester is put through, the US budget deficit will shrink sharply this year but that also economic growth will be crunched from 2012's 1.9 per cent to just 1.4 per cent.
"If all of the fiscal tightening still embodied in current law for 2013 was removed, growth in real GDP would be about 1.5 percentage points higher this year than CBO currently projects," the study said.
Mr Obama said his short-term plan would allow the White House and Congress more time to come up with a strategy to cut the deficit, which he insists, despite Republican opposition, must include new revenue from higher taxes.
Republicans want to prevent the massive cuts about to hit the Pentagon, which they say will hurt US military readiness and have proposed their own measures to cut expenditures.
But Mr Obama says the plans would harm social programmes and says he will refuse to balance the budget on the backs of the middle class.
The sequester was agreed by the president and Congress to be so punishing that it would force Washington's warring political factions to forge an agreement on deficit cuts.
But no agreement is in sight, and the cuts have already been put off once, by a short-term deal agreed between Mr Obama and Republicans late last year.
Republicans tried to blame Mr Obama for coming up with the idea of the sequester, though the measure was passed by both houses of Congress, so the blame is shared.
Cuts due to come into force in March will slash defence spending by US$55 billion (S$68 billion) and non-defence discretionary spending by US$27 billion this year, and will have a painful impact on the economy.
The Bipartisan Policy Center has warned that a million jobs will be lost by the end of next year caused by a slowdown brought on by the cuts.