White House blames Republican "brinkmanship" for GDP contraction

Reuters News
Posted: Jan 30, 2013 1:10 PM

By Mark Felsenthal

WASHINGTON (Reuters) - The White House on Wednesday blamed the surprising contraction of the economy at the end of last year at least partly on Republican "political brinkmanship" for threatening to let defense cuts take effect.

White House spokesman Jay Carney said similar threats over a looming March 1 deadline when defense and other cuts take effect absent a broader budget deal could similarly hurt the U.S. economy and taxpayers.

"This is political brinkmanship with one primary victim, and that is American taxpayers and the American middle class," Carney said at a briefing.

"Our economy is facing a major headwind ... and that's Republicans in Congress."

Carney referred to comments by former vice presidential candidate and House of Representatives Budget Committee Chairman Paul Ryan, who said Sunday he believes the automatic spending cuts will go into effect because Democrats have not offered alternatives, and remarks made by House Speaker John Boehner.

Boehner said in a January 6 interview that he had the spending cuts "in my back pocket" for use as a bargaining chip in budget talks with the White House.

"It's not a game. It's the American economy," Carney said. "The American people - those who pay attention to this issue in detail - are rightly appalled by those kind of tactics that, you know, do harm to their lives, do harm to the economy in the name of ... achieving some political objectives here in Washington."

Despite a temporary truce over the "fiscal cliff" and raising the debt ceiling, the White House and congressional Republicans remain at odds over tax and spending measures, with both sides agreeing that reducing the nation's massive budget deficit is desirable but at loggerheads over how and how fast.

Obama and lawmakers were able to avoid a year end "fiscal cliff" of deep automatic spending cuts known as the sequester and tax increases at the end of 2012. Republicans agreed to extend temporarily the U.S. capacity to borrow without demanding spending cuts in return.

However the two sides still face the prospect of painful across-the-board spending cuts in a month if they do nothing.

Carney cast the 0.1 pct decline in U.S. economic output in the fourth quarter of last year - which was driven by the deepest plunge in defense spending in 40 years - as an example of how uncertainty over the government's fiscal plans hurt economic growth.

"The GDP number we saw today was driven in part by, in large part by a sharp decrease in defense spending," he said. "And at least some of that has to do with the uncertainty created by the prospect of sequester."

Republican aides responded by noting that the very idea of sharp automatic cuts as a way to force negotiators to come to terms was reportedly the White House's idea.

"These arbitrary, automatic cuts were a creation and demand of the White House in 2011," Boehner spokesman Brendan Buck said.

(With additional reporting by Steve Holland and Roberta Rampton; Editing by Cynthia Osterman)