US President signs order to start spending cuts

President Barack Obama has signed an order authorising $85bn cuts in domestic and defence spending following the failure of efforts to strike a deal with Republicans on cutting the US deficit.

Obama and Republican leaders in the House and Senate declared themselves still deadlocked after a last-minute White House meeting last night.

Sky News reports that the two sides are at odds over the president's insistence on increasing tax revenue as part of any plan to tackle the country's $16.6trn debt.

Obama signed the order which officially enacts the across-the-board reductions - known as a "sequester" in government budget language. Under the law, the president had until midnight.

The $85bn cuts apply to the remainder of the 2013 fiscal year, which ends on September 30. But the legislation that requires the spending reduction will continue slashing government spending by about $1trn more over a 10-year period.

"Let's be clear, none of this is necessary," Obama said after the signing.

He blamed the deadlock on Republicans who he said refused to close tax loopholes that benefit the wealthy, adding that "the pain will be real" for the American people.

"I am not a dictator. I'm the president," Obama said, warning he could not force his Republican foes to "do the right thing," or make the Secret Service barricade Republicans leaders in a room until a deal is done.

"These cuts will hurt our economy, will cost us jobs and to set it right both sides need to be able to compromise," Obama added.

Republican John Boehner, speaker of the House of Representatives, walked out of the meeting to say there would be no compromise as long as Obama insisted on higher tax revenue.

Republicans are standing fast against further increasing taxes and will not compromise on achieving debt reduction through spending cuts alone.

The opposition party is still feeling the sting from its most conservative members after agreeing at the end of 2012 to allow the expiration of Bush-era tax cuts for Americans earning $400,000 or more a year.