Obama highlights the defense hit in budget cuts battle

NEWPORT NEWS, Virginia Wed Feb 27, 2013 1:13am IST

U.S. President Barack Obama speaks at Newport News Shipbuilding in Newport News, Virginia February 26, 2013. REUTERS/Kevin Lamarque

U.S. President Barack Obama speaks at Newport News Shipbuilding in Newport News, Virginia February 26, 2013.

Credit: Reuters/Kevin Lamarque

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NEWPORT NEWS, Virginia (Reuters) - President Barack Obama took his case for softening the effect of deep budget cuts to a shipyard town dependent on defense contracting on Tuesday, but there was little sign he will be able to halt automatic cuts from starting this week.

"These cuts are wrong. They are not smart, they're not fair. They are a self-inflicted wound that doesn't have to happen," he told workers in Newport News, Virginia.

He was speaking in front of a huge submarine propeller at the Newport News Shipbuilding shipyard where scheduled maintenance to the aircraft carrier USS Abraham Lincoln has been delayed due to the budget crisis.

It was the latest event staged by the White House to warn of the possible damage to public services - from less child care to air travel chaos - from the $85 billion across-the-board budget cuts that are due to begin on Friday.

An agreement in Congress would halt the cuts but with days to go before the ax starts to fall the two parties do not agree on what to replace them with.

Republicans seek different, more targeted, spending cuts than entailed in "sequestration," as the automatic cuts are known in Washington budget parlance. They complain that Obama is overplaying worries about sequestration to promote long-held plans to close tax loopholes.

House of Representatives Speaker John Boehner accused Obama of using "our military men and women as a prop in yet another campaign rally to support his tax hikes."

"The president's been running around acting like the world's going to end because Congress might actually follow through on an idea he proposed and signed into law - all the while pretending he's somehow powerless to stop it," said Mitch McConnell, the Senate's Republican minority leader.

In a sign of how far they are from halting sequestration, congressional Republicans and the White House have been trying to blame each other for the cuts, which both Democrats and Republicans agreed to in a 2011 plan to fix an earlier budget crisis.

With a trip to a defense-heavy region of the country, Obama is seeking to draw attention to how the cuts would play out in communities where the military is a major source of jobs.

The sequestration cuts apply in equal measure to non-defense spending and defense spending, which makes up 9.8 percent of Virginia's gross domestic product.

The reductions will force the Pentagon to put most of its 800,000 civilian employees on unpaid leave for 22 days, slash ship and aircraft maintenance and curtail training, Defense Department officials have told Congress. Pentagon contracting and acquisitions personnel were authorized last week to consult with their industry counterparts about the upcoming spending cuts.

But sequestration will be brought in gradually, and no shock to the economy is expected on Friday when it starts.

GRADUAL IMPACT

"The impact of this policy won't be felt overnight but it will be real," Obama said. "The longer these cuts are in place the greater the damage."

The planned cuts will be phased in over seven months, giving lawmakers time to halt the worst effects, possibly in budget talks later in March.

Senator John Hoeven, a North Dakota Republican, said sequestration might be stopped as part of negotiations next month over a continuing resolution, known as a CR, to fund government operations.

"I think what you'll see, what I think is most likely is the House will provide a CR that includes flexibility for the president to make reductions in a thoughtful way to address the sequester. And then we'll be on board working with that," Hoeven told reporters on Monday night.

But some Republicans think they are in a strong bargaining position as there is not likely to be public outcry when the cuts start, unlike the "fiscal cliff" crisis at the New Year when the threat of tax hikes for most working Americans kept pressure on lawmakers to reach a deal.

(Additional reporting By Patricia Zengerle and Roberta Rampton in Washington; Editing by Tim Dobbyn)

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