Across-the-board federal spending cuts began Friday, clearing the way for a series of budget battles that will consume much of Congress's energy and threaten to eclipse other items on President Barack Obama's second-term agenda.

President Obama spoke with reporters Friday after meeting congressional leaders at the White House. Reuters

Mr. Obama signed an order late Friday directing $85 billion in cuts to domestic and defense programs, after holding a fruitless meeting with congressional leaders who remained at odds over how to avoid the reductions, known as a sequester.

The president said Friday he wouldn't allow continuing disagreements over spending cuts to derail his broader agenda, but attention now will turn to the next budget deadline—the need to pass a bill extending routine government funding after a stopgap bill expires March 27. Without an extension, a partial government shutdown would occur. The House of Representatives next week is expected to pass a Republican bill that would keep the government operating through September at the spending levels dictated by the sequester.

The painful spending cuts called the sequester are finally here. WSJ's Julian E. Barnes and Colleen McCain Nelson discuss the real effects - including military preparedness - as well as the significant political risk for President Obama and Republican lawmakers.

Gene Sperling, a top White House economic adviser, tells the WSJ's David Wessel that the sequester's painful cuts are so drastic they will succeed in bringing both Democrats and Republicans back to the negotiating table.

California Rep. Howard 'Buck' McKeon, the head of the Armed Services Committee, tells WSJ's Jerry Seib he is "very concerned" about how the defense portion of the sequester cuts will affect American troops.

In a press conference on the eve of the sequester, President Barack Obama detailed the efforts he has taken to curb the severe budget cuts. Obama asked the room full of reporters, "what more do you think I should do?" Photo: Getty Images.

As the sequester begins, Bipartisan Policy Center's Task Force on Debt Reduction co-chair Alice Rivlin joins The News Hub to discuss what Washington needs to do to stop lurching from crisis to crisis. Photo: Getty Images.

In comments to reporters Friday, Mr. Obama signaled that he was determined to avoid another round of brinkmanship over the funding bill.

"There's no reason why we should have another crisis by shutting the government down in addition to these arbitrary spending cuts," Mr. Obama said.

Republicans indicated they would remain focused on curbing spending.

"Over the coming weeks, we'll have the opportunity to ensure funding is at the level we promised while working on solutions for making spending reductions more intelligently," said Senate Minority Leader Mitch McConnell (R., Ky.), who attended the meeting at the White House.

Investors on Friday again shrugged off the onset of the cuts, sending the Dow Jones Industrial Average up 35.17 points to 14089.66, its third-highest close of all time. The blue-chip index rose 0.6% for the week, its second consecutive weekly advance.

Warren Buffett, in his annual letter to shareholders of Berkshire Hathaway Inc., released Friday afternoon, didn't comment directly on the budget debates but told his fellow CEOs to ignore short-term uncertainties. "Of course, the immediate future is uncertain; America has faced the unknown since 1776.…American business will do fine over time," he wrote.

Both Republicans and Democrats had said for more than a year that they would rather replace the indiscriminate cuts with a more gradual, negotiated deficit-reduction deal. In an October debate with Mitt Romney during the presidential campaign, Mr. Obama said flatly that the across-the-board cuts "will not happen." For weeks, administration officials have warned that the cuts would be painful, disruptive and inconvenient.

House Speaker John Boehner spoke to reporters outside the White House Friday. Associated Press

But on Friday, Mr. Obama walked a careful line, saying the cuts would bring consequences but that the American people—and the economy—are resilient.

"This is not going to be an apocalypse, I think, as some people have said," Mr. Obama said. "It's just dumb. And it's going to hurt. It's going to hurt individual people, and it's going to hurt the economy overall."

Mr. Obama on Friday summoned to the White House four congressional leaders—Mr. McConnell, House Speaker John Boehner (R., Ohio), Senate Majority Leader Harry Reid (D., Nev.) and House Minority Leader Nancy Pelosi (D., Calif.)—for the hourlong meeting. Mr. McConnell, afterward, said his party would remain focused on curbing spending.

Mr. Obama had until midnight Friday to notify federal agencies that he had authorized the sequester to begin, setting in motion a chain of federal, state, and local decisions that will likely play out for months.

The order instructs different branches of the government to shrink their budgets according to a specific formula. The agencies, in turn, will notify employees, contractors, and in many cases state and local governments about what the changes will mean to the federal dollars they receive. Grants, emergency unemployment benefits and other payments could be adjusted immediately. Unpaid furloughs of federal workers, however, might not begin until April, May, or even later in the year.

The White House's Office of Management and Budget said the cuts would be split in a way that would reduce the budget authority of defense programs by $42.667 billion, nondefense programs by $31.320 billion, and Medicare payments to doctors and hospitals by $11.347 billion.

In an 83-page report, it detailed the hundreds of budget accounts that would be affected. They include things such as the $2.501 billion account for Wildland Fire Management to be reduced by $125 million, the $22.803 billion Air Force aircraft procurement budget reduced by $1.779 billion, and the $2.442 billion Energy Department's nuclear nonproliferation budget reduced by $191 million.

If Congress and the president could reach even a temporary cease-fire on the budget, Mr. Obama might have an opportunity to advance his other legislative goals, including an immigration overhaul and new gun-control measures. Next week, the president will pivot from the budget issues that have dominated his public appearances for weeks, and instead use his White House microphone to focus on other issues.

Congressional leaders were never close to an agreement to block or replace the $85 billion in cuts. Mr. Obama has said any sequester replacement bill must include the same amount of deficit reduction, achieved through both tax increases and spending cuts; Republicans oppose any tax increases, especially so soon after Congress in January enacted more than $600 billion in tax increases to avoid the so-called fiscal cliff.

"The discussion about revenue, in my view, is over," Mr. Boehner said after the Friday meeting. However, inside the meeting, the speaker indicated willingness to "close tax loopholes"—not to replace spending cuts but as part of a broader tax overhaul that would lower rates, according to a GOP aide briefed on the meeting.

Mr. Obama said he hoped that once the dust settled on the sequester, the two sides could pivot to renewed discussion of tax and entitlement overhaulsthat could produce a long-term deficit-reduction plan. "It may take a couple weeks," he said. "It may take a couple of months."

The more immediate concern is the need to keep the government operating after March 27. The House is expected to pass next week a Republican bill to extend funding for many government programs—including defense, education and veterans' benefits—at the pre-sequester level of $1.043 trillion for the fiscal year ending Sept. 30, the same level as the year before. But it would also carry a provision saying that sequestration would apply. That would bring the cost of the bill below $1 trillion, which is considered key to winning support from House GOP conservatives.

Senate Democrats haven't directly said what they would do with the House GOP bill, except to say they want to give domestic agencies the same protection and flexibility given the Pentagon. Democratic officials said privately it would be too risky a battle to try to undo the sequester on that funding bill, fearing that Democrats would be blamed if a fight forced a government shutdown.

Write to Janet Hook at, Colleen McCain Nelson at and Damian Paletta at