RegionsNorth AmericaUS Budget Cuts Kick in as Deadline for Deal Passes

US Budget Cuts Kick in as Deadline for Deal Passes

US Congress has adjourned for the weekend without reaching a deal to avoid US$85bn in federal spending cuts coming into force, which will impact areas ranging from defence to education.

Although president Barack Obama and congressional leaders are scheduled to meet, hopes of a last-minute solution are low, with Democrats and Republicans each blaming each other for the impasse, which dates back to an August 2011 deal to increase the US debt ceiling. Although the prospect of substantial cuts was supposed to force an agreement to be reached, budget bills from both parties were defeated in the Senate on 28 February.

The International Monetary Fund (IMF) has warned that the effect of the cuts could extend beyond the US economy and impact on global economic growth. Obama criticised Republicans in the Senate of allowing the cuts to proceed rather than “closing a single tax loophole that benefits the well-off and well-connected”.

“They voted to let the entire burden of deficit reduction fall squarely on the middle class,” he said in a statement.

The spending cuts, otherwise known as the sequester, would see a 10% reduction in the US defence budget and 8.5% for other programmes. Barring a late agreement they will be introduced into the federal budget by 23:59 local time today, with Obama notifying government agencies that the sequestration process is in effect.

Although the cuts will not take effect immediately, some parts of the federal government may be shut down in the absence of any agreement by 27 March, when a temporary budget that has kept the federal government running is due to expire. Millions of federal workers face the prospect of having to take off 22 days without pay this year.

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