WASHINGTON -- President Barack Obama on Tuesday urged Congress to head off deep, automatic spending cuts set to hit the Pentagon and other federal agencies March 1 and replace them, at least for a few months, with a new debt-reduction package that includes fresh tax revenue.
As Mr. Obama spoke, the nonpartisan Congressional Budget Office rolled out new projections showing that the past two years' spending battles helped shrink record budget deficits but also hampered economic growth. The deficit -- the annual gap between taxes and spending -- is projected to fall to $845 billion this year, the first time it has come in under $1 trillion since 2008.
The improvement in the 2013 deficit is due in large part to tax increases adopted Jan. 1 and to the automatic spending cuts, known as the "sequester." Together, the CBO said, those policies are expected to shave about 1.25 percentage points off economic growth this year and cost about 1.5 million jobs.
Mr. Obama said he is committed to a broad effort to restrain the national debt, and that past White House proposals to rein in Medicare costs and to trim increases in Social Security benefits "are still very much on the table" as part of that effort.
But with the sequester due to hammer the fragile economic recovery in less than a month, the president said Congress should take quick action on a short-term measure to replace it, giving policymakers more time "to finish the job of deficit reduction."
"Congress is already working towards a budget that would permanently replace the sequester. At the very least, we should give them the chance to come up with this budget, instead of making indiscriminate cuts now that will cost us jobs and significantly slow down our recovery," Mr. Obama said during an appearance in the White House briefing room. "So let me just repeat: Our economy right now is headed in the right direction, and it will stay that way as long as there aren't any more self-inflicted wounds coming out of Washington.
"Deep, indiscriminate cuts to things like education and training, energy and national security will cost us jobs, and it will slow down our recovery."
The CBO expects the recovery to be more robust in 2014, with economic growth approaching 3.5 percent by year's end. But an economy subdued by government austerity is apt to have a jobless rate above 7.5 percent for a sixth straight year, the CBO said -- the longest period in 70 years with unemployment above that level.
Replacing the sequester for one month, without increasing deficits, would require about $12 billion in alternative savings. Mr. Obama declined to outline his proposal, immediately drawing fire from Republicans. He has made clear that he expects wealthier Americans and industries with special tax advantages to shoulder some of the burden.
House Democrats have proposed replacing this year's sequester cuts, worth about $85 billion through the end of September, with equivalent savings spread out over the next decade. Those include tax increases for millionaires and oil and gas companies, as well as cuts in farm subsidies. Senate Democrats are working on a similar plan.
Many Republicans also want to replace the sequester, particularly about $45 billion in Pentagon cuts in 2013 that defense officials say would devastate the military. A report last week found that the economy contracted in 2012's fourth quarter, in part because of sharp cuts in defense spending amid concerns about the sequester.
But House Speaker John Boehner, R-Ohio, said Tuesday that the GOP would oppose any effort to replace the cuts with tax increases. The likelihood that they would have to compromise with Democrats to replace the sequester has led to a Republican inclination to simply pocket the savings and move on.