Now, it looks like it’s going to happen.
Senate Majority Leader Harry M. Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.) spent Saturday working on a last-ditch deal to spare the vast majority of Americans a dramatic tax increase on Jan. 1.
Aides said the two sides hope to secure a large spending-reduction package in the late winter — during an expected showdown over lifting the federal debt ceiling — and deal with sequestration, as the automatic cut is called in Congress-speak. But that possibility would still result in a potentially harrowing few months for agency budgets.
In the meantime, the Washington region, home to hundreds of thousands of federal workers and an economy that was cushioned from the worst of the 2007 recession by federal spending, was bracing Saturday for an economic punch from the failure to deal now with sequestration.
Federal agencies have informed their employees that they probably wouldn’t feel the impact immediately, but the reality that widespread furloughs are possible is setting in for a deeply anxious federal workforce.
“Undoubtedly, we will take a hit,” said Rep. Gerald E. Connolly (D), whose Northern Virginia district is inhabited by thousands of government employees and contractors. “It’s going to result in a steady retrenchment in government investment in both the civilian and defense sectors. That’s going to affect employment and the robustness of our economic growth in this region.”
Fiscal cliff talks remained in flux Saturday, and the details of a final deal, if there is one, remain unclear. But at a White House meeting of President Obama and congressional leaders on Friday, House Speaker John A. Boehner (R-Ohio) said he could not agree to delay or call off the automatic cuts unless Congress agreed to enact an alternative package of reductions of matching size.
That would seem a tall order given that spending cuts have been at the heart of the partisan divide over the past two years. A House Republican said after the Friday meeting that “it was clear that the sequester is not likely to be addressed in any immediate agreement.”
And although Obama vowed during an October debate with Republican presidential nominee Mitt Romney that the cuts “would not happen,” White House officials were telling liberal allies on Friday that their focus for now is merely to spare the middle class a tax increase.
The development was causing near panic among industry groups and others who have prodded Congress to cancel the cuts and have long believed elected officials who said they would do so.