US lurches into new budget crisis, spending cuts imminent
The United States lurched into a new budget crisis on Friday as President Barack Obama and Republicans failed to agree on stopping broad spending cuts that could dampen economic growth and curb military readiness.
Put in place during a bout of deficit-reduction fever in 2011, the automatic cuts can only be halted by a deal between Congress and the White House.
As expected, talks at the White House on Friday were fruitless, meaning that government agencies will now begin to hack a total of $85 billion from their budgets between Saturday and Oct. 1. Financial markets in New York shrugged off the stalemate in Washington.
Democrats predict the cuts, known as "sequestration," could soon cause air-traffic chaos, delays in food safety inspections and less aid to the homeless as hundreds of thousands of federal employees are forced to take furloughs.
The nation's largest employer with a civilian workforce of 2.7 million people, the U.S. government begun notifying staff to prepare for reduced hours and slashed paychecks.
New U.S. Defense Secretary Chuck Hagel said the cuts, half of which will fall on the Pentagon, put at risk "all of our missions."
While the International Monetary Fund warned that the belt-tightening could slow U.S. economic growth by at least 0.5 of a percentage point this year, that is not a huge drag on an economy that is picking up steam.
Many Republicans accuse the administration of overstating the effects of the cuts in order to pressure them into agreeing on a solution to the White House's liking.
Obama said
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