Obama applies fresh pressure on Republicans to avoid cuts

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By Steve Holland and Roberta Rampton | February 20, 2013 6:28 AM EST

President Barack Obama renewed pressure on congressional Republicans to head off budget cuts that are due to begin on March 1, staging a White House appearance with emergency workers to illustrate jobs he said were at risk.

Obama is trying to get concessions from Congress to stall the cuts by ending tax breaks enjoyed mainly by wealthy Americans.

"My door is open. I put tough cuts and reforms on the table. I am willing to work with anyone to get this job done," Obama said at the event. In a symbolic gesture, Obama was flanked by 17 uniformed fire-fighters and law enforcement officers who would not necessarily be laid off by the cuts.

With both houses of Congress off this week, there seemed to be little movement toward a compromise on halting the cuts.

Unless there is a deal, about $85 billion (55 billion pounds) in across-the-board spending cuts begin on March 1 and continue through September 30 as part of a decade-long $1.2 trillion budget savings plan.

"This is not an abstraction. There are people whose livelihoods are at stake," Obama said, noting the cuts, known as "sequestration," could hurt the economy.

At the same time, a bipartisan fiscal commission appointed by Obama added to the Washington debate over spending by proposing $2.4 trillion in deficit reduction over 10 years.

Under the sequestration budget measures, half the cuts would be shouldered by the Pentagon and the other half scattered among many other government agencies.

Obama's offensive against the March 1 budget cuts is aimed at holding off what the non-partisan Congressional Budget Office has estimated would hold back U.S. growth and prevent the creation of about 750,000 jobs this year.

But even if the cuts happen, Congress is expected to blunt their effect by negotiating a replacement measure in March at the same time as lawmakers work on a deal to fund government agencies that run out of money on March 27.

OPEN DOOR?

Senate Republican Leader Mitch McConnell criticized Obama for holding a "campaign-style" event rather than focusing on cutting government waste or trimming spending on green energy programs.

"President says his door is open, but he's spent more time in 2013 with Tiger Woods than with all congressional Republicans," said Doug Heye, a spokesman for House Republican Leader Eric Cantor, on Twitter. He was referring to Obama's golf weekend in Florida, during which he played with Woods.

Republican Speaker John Boehner said the House has twice passed a plan to replace the sequester with "common sense cuts" and said the president needs to show he was willing to make cuts to keep emergency workers and others on the job.

"Just last month, the president got his higher taxes on the wealthy, and he's already back for more," Boehner said in a statement.

Obama has been adamant that any budget agreement to replace the cuts reflect a balanced approach and include both budget cuts and tax increases.

To give Congress time to act on a long-term solution, Obama urged congressional Republicans to accept a smaller $110 billion package that Democrats proposed last week.

But Republicans believe they have raised taxes enough after reluctantly agreeing to increase them on the wealthy as part of a deal that avoided the "fiscal cliff" of higher taxes and spending cuts that would have kicked in at the end of 2012.

Republicans want deeper spending cuts to reduce the United States' $1 trillion annual deficits and $16 trillion national debt.

The bipartisan fiscal commission, led by Erskine Bowles, a Democrat, and Alan Simpson, a Republican, would cut spending, overhaul the tax system and reform the healthcare system. Under the proposal, about one-fourth of the $2.4 trillion in deficit reduction would come from healthcare reforms and another fourth from tax reform.

The remaining reduction would come from a combination of mandatory spending cuts, stronger caps on U.S. discretionary spending, using the Consumer Price Index for inflation-indexed provisions in the budget and lower interest payments.

It is unclear how much impact the plan will have because it contains elements that have been non-starters for each party - further tax revenue, which has been rejected by Republicans; and even deeper cuts to entitlement programs such as Medicare, a notion rejected by Democrats.

The $600 billion in proposed savings on federal healthcare spending reflects the scale of reduction that Republicans have sought in deficit talks. But the approach is more in line with Obama's proposals for reducing underlying healthcare costs and seeking modifications rather than radical changes to programs.

The healthcare target dwarfs both the $400 billion in savings from Medicare, Medicaid and other healthcare programs sought by Obama and the $342 billion in savings proposed by the Simpson Bowles commission in December 2010. However, the two men said the new proposal is not based on commission findings but rather on ideas discussed in last year's fiscal cliff debate.

"What we tried to do is make enough cuts in healthcare to slow the rate of growth on a per capita basis to the rate of growth of the economy. In our opinion, that takes about $600 billion over a 10-year period," Bowles told CNBC.

(Additional reporting by Matt Spetalnick; Editing by Cynthia Osterman)

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