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Obama signs deep US budget cuts into effect

President signs into effect $85bn in spending cuts after legislators fail to reach a deal to avert them.
Last Modified: 02 Mar 2013 21:37

Barack Obama, the US president, has signed an order that starts putting into effect deep across-the-board budget cuts, after he and congressional leaders failed to find an alternative budget plan.

Obama acted on Friday, the deadline for the president and Congress to avoid the deep, one-year cuts.

The cuts, known as the "sequester," will take $85bn from the US federal budget between Saturday and October 1.

The sequester was agreed upon in 2011 as part of a deal to lift the federal debt ceiling. It was rather a device seen as so punishing that rival legislators would be forced to find a better compromise to cut the deficit.

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Both Obama and the Republican leaders in the House and Senate failed to resolve the deadlock in a last-minute White House meeting before midnight.

Obama said the cuts were "dumb and arbitrary," and blamed them on the Republicans, adding that it could take a couple of weeks or a couple of months to reach a deal.

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

The two sides are at odds over the president's insistence on increasing tax revenue as part of any plan for attacking the country's $11.7 trillion debt.

Obama wants to close the fiscal gap with spending cuts and tax hikes, a move bitterly opposed by the Republicans.

Republicans, who lost a showdown on raising tax rates on the rich late last year, have refused to accept any further tax raises as part of a solution.

Also looming on the horizon is the expiration of the federal budget: the government's spending authority runs out on March 27.

'Deeply destructive'

The US president was bound by law to initiate the automatic cuts, which could wound the already fragile economy, cost a million jobs and harm military readiness.

The White House predicted that the spending cuts would be "deeply destructive" to the nation's economic and national security.

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The International Monetary Fund warned that the cuts could slow US economic growth by at least 0.5 of a percentage point this year.

The measures could mean reduced military readiness, cuts to special needs education programmes, and will trim the resources of some emergency services, according to White House officials.

The US government is the nation's largest employer, with a workforce of roughly 2.7 million civilians spread across the country. If the cuts stay in place, more than 800,000 of those workers could see reduced work days and smaller paychecks between now and September.

The Pentagon will be forced to slice 13 percent of its budget between now and September 30.

Chuck Hagel, the new defence secretary, warned that the sequester could endanger the military's capacity to conduct its missions.

"Let me make it clear that this uncertainty puts at risk our ability to effectively all of our missions," Hagel said.

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