With sequester in place, what's next?

The U.S. Capitol in Washington, DC, is seen February 28, 2013. Two competing bills aimed at averting huge spending cuts failed February 28, 2013 in the Senate, virtually assuring that the USD 85 billion in indiscriminate, across-the-board cuts known as the sequester will kick in after the March 1, 2013 deadline.
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The government is not going to shut down on March 27, lawmakers from both parties are assuring their constituents, three days after an axe dropped indiscriminately across the federal budget leaving millions of jobs and government-funded projects in flux.

It's a mad scramble to save face following yet another failure by Congress in recent years to avert a budget crisis, but it comes with a stipulation: To agree on a drama-free measure to fund the government through the remainder of the fiscal year, legislators are unlikely to include in the deal a replacement package for sequestration, despite pressure from all sides to do so.

Democrats, in particular, have cited the continuing resolution (CR) of 2013 - a stopgap funding measure set to expire March 27 - as an opportunely timed budget evaluation, into which could be rolled a more carefully targeted deficit reduction plan. On Friday, President Obama told reporters he would not stand in the way of a bill that complies with the discretionary spending level of $1.043 trillion set in 2011, but indicated the politics of sequestration are too polarizing for inclusion in the CR.

Sequester cuts, he said, "are additional cuts on top of that. And by law, until Congress takes the sequester away, we'd have to abide by those additional cuts. But there's no reason why we should have another crisis by shutting the government down in addition to these arbitrary spending cuts."

House Speaker John Boehner, R-Ohio, in a Friday interview that aired Sunday on NBC's "Meet the Press," said he was "hopeful" following a "pleasant" meeting with President Obama. "The president... agreed that we should not have any talk of a government shutdown," he said. But the speaker, who argued that no one had been more devoted than he to avoiding sequestration, admitted the course of the automatic cuts remains unclear.

"I don't know whether its going to hurt the economy or not - I don't think anyone quite understands how it gets resolved," Boehner said of the sequester, crafted during the 2011 debt ceiling battle to be so reckless that the bitterly divided Congress would be forced to work together to come up with a substitute.

Several days into actual enactment of the cuts, the New York Times's David Sanger during a roundtable discussion on Sunday's "Face the Nation" said the fact that lawmakers have reached this point demonstrates "a fairly serious miscalculation" by the president: "He believed that these cuts in defense would be so outrageous to the Republican Party that they would never let it happen," he said.

"It turns out that the part of the party that wanted to see cuts happen, to shrink government, won out over the traditional side that would defend the Defense Department," Sanger continued.

Gene Sperling, head of the president's National Economic Council, said striking an alternate deal with Republicans remains a priority for Mr. Obama and his administration.

"We will still be committed to trying to find Republicans and Democrats that will work on a bipartisan compromise to get rid of the sequester," he said.

If not replaced, $85 billion worth of the total $1.2 trillion in spending cuts - 50 percent of which are focused on defense - are mandated to play out by September 30. Largely at issue is a disagreement between Mr. Obama and House Republicans over whether to partner spending cuts with additional revenue through tax hikes.

GOP senators like Lindsey Graham, R-S.C., have argued there is certainly revenue to be found through tax and entitlement reform, but said they won't budge on increasing tax rates after January's deal to avert the "fiscal cliff" upped taxes on households making more than $450,000 a year.

Senate Minority Leader Mitch McConnell, R-Ky., said on CNN's "State of the Union" that Republicans are "willing to talk to [the president] about reconfiguring the same amount of spending reduction over the next six months," but played down the effects of the cuts. Arriving at the brink of sequestration, though, gives both sides "a little bit of breathing room," according to CBS News political director John Dickerson.

"The president can say to Republicans, 'Look: we've cut a lot,' and Republicans can say, 'We didn't give in on this latest request for revenues," Dickerson said Sunday on "Face the Nation." At center stage in the debate now, he added, are entitlements, which Republicans have long argued cuts to, and which President Obama for the first time this weekend suggested as a possible area to be trimmed.

During calls with both party's leaders on Saturday, Sperling said on "State of the Union," Mr. Obama tendered reform to Social Security and Medicare as one suggestion for how to navigate out of sequestration.

"He's reaching out to Democrats who understand we have to make serious progress on long-term entitlement reform, and Republicans who realize that if we had that type of entitlement reform, they'd be willing to have tax reform that raises revenues to lower the deficit," Sperling said.

Sens. Graham and Dick Durbin, D-Ill., agreed on "Face the Nation" that some give and take from both parties in Washington will be critical to move the budget legislation piling up on the desks of Congress.

"I hope what I'm seeing is that we're trying to establish a new standard in the Senate - a bipartisan dialogue that might lead to a solution," Durbin said of his "gang of eight" Republican and Democratic colleagues working with him to author immigration reform legislation. "I think people who have given up on Congress would be encouraged to know there's a real positive dialogue, bipartisan dialogue, and perhaps - just perhaps - we can set the stage for an even more positive dialogue when it comes to the budget."

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    Lindsey Boerma is senior video producer for CBSNews.com.