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Did 'sequester' backfire? Obama calls for 'smarter solution.'

President Obama asks Congress to pass limited spending cuts and tax reforms to avoid the March 1 sequester – and buy time for a long-term deal on deficit reduction. Republicans aren't impressed.

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At an announcement in the White House briefing room Tuesday, President Barack Obama called on Congress to pass a small package of spending cuts and tax reforms that would delay the larger, automatic 'sequester' cuts from going into effect.

Joshua Roberts/Reuters

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President Obama called on Congress to pass limited spending cuts and tax reforms Tuesday, in an effort to buy more time – “a few more months” – to craft a deal on long-term deficit reduction. The hope, he said, is to avoid the economically damaging, across-the-board spending cuts known as the “sequester,” which is due to take effect March 1.

Congress is not likely to pass a budget before then, thus the need for a short-term fix, Mr. Obama said. The March 1 deadline for the sequester already represents a delay from its original deadline of Dec. 31, when it was postponed as part of the “fiscal cliff” deal between the White House and congressional Republicans. With yet more time, Congress can “replace these cuts with a smarter solution,” Obama said.

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“There is no reason that the jobs of thousands of Americans who work in national security or education or clean energy, not to mention the growth of the entire economy, should be put in jeopardy just because folks in Washington couldn't come together to eliminate a few special-interest tax loopholes or government programs that we agree need some reform,” the president said, speaking from the White House briefing room.

Obama added that the proposals he put forward during the fiscal-cliff negotiations late last year are “still very much on the table.” But the sticking point with Republicans is still there: higher tax revenues. Republican leaders say they’re done with tax hikes, having conceded an increase in the tax rate for the wealthiest Americans from 35 percent to 39.6 percent in the fiscal-cliff deal.

“The deals that I put forward, the balanced approach of spending cuts and entitlement reform and tax reform that I put forward, are still on the table,” Obama said, touting “sensible reforms” to Medicare and other entitlement programs, as well as savings in health care.

Republican leaders in Congress were not impressed. The White House had put out advance notice of the president’s proposal, and even before Obama spoke, House Speaker John Boehner rejected it.

“President Obama first proposed the sequester and insisted it become law,” Speaker Boehner said. “Republicans have twice voted to replace these arbitrary cuts with common-sense cuts and reforms that protect our national defense. We believe there is a better way to reduce the deficit, but Americans do not support sacrificing real spending cuts for more tax hikes.”

The idea for the sequester did originate with the White House during the 2011 debt-ceiling crisis, according to Bob Woodward’s latest book, “The Price of Politics,” but the deep spending cuts were never intended to go into effect. The sequester was meant to hang over deficit reduction talks like an anvil – something that would be so painful that it would never be allowed to fall.

Instead, the sequester’s $1.2 trillion in spending cuts over 10 years – half from defense spending, half from nondefense discretionary spending – has become part of a series of “fiscal mini-cliffs” that threaten to dog Obama’s second term, if agreement on long-term deficit reduction can’t be reached. With divided government and politics highly polarized, optimism is in short supply.

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In his remarks, Obama warned of damage to the economy if the sequester were to go into effect.

“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,” he said.

But signs point to a still-fragile economic recovery. The unemployment rate ticked up to 7.9 percent last month, and the economy shrank by 0.1 percent in the fourth quarter of 2012, according to a preliminary report last week by the federal government’s Bureau of Economic Analysis. Analysts attributed the shrinkage to a sharp decline in defense spending and business inventories. Defense spending last quarter fell 22 percent, after rising 13 percent in the third quarter.

National security would also be put at risk if the sequester went into effect, top Pentagon officials warned on Sunday.

"We will become less safe," Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff, said on NBC's "Meet the Press."