US automatic spending cuts

Obama orders across-the-board budget cuts

US President Barack Obama has signed an order on Friday that starts putting into effect across-the-board budget cuts known as the 'sequester' after he and congressional leaders failed to find an alternative budget plan.

Radio NZ,

2 June, 2013

The White House has released a copy of Mr Obama's directive entitled Sequestration Order for Fiscal Year 2013. 

A deal proved elusive in talks at the White House on Friday, meaning that government agencies will begin to slice a total of $85 billion from their budgets between now and 1 October.

The order follows the failure Mr Obama and congressional leaders to find an alternative budget plan that would avoid the series of steep budget cuts.

The budget plan put in place in 2011 initiates automatic, across-the-board cuts that can only be halted by agreement between Congress and the White House.

Speaking after the failed talks Mr Obama described the raft of spending reductions as a series of arbitrary and avoidable cuts to the things Americans depend on.

Mr Obama blamed the Republicans' refusal to allow any tax rises for the failure to reach a deal and called the spending cuts inexcusable.

Republican House Speaker John Boehner reiterated his party's refusal to allow tax increases and challenged the gridlocked US Senate to pass a bill first before the House acted on a plan.

The International Monetary Fund warns that US economic growth could be slowed by 0.5 of a percentage point this year as a result of the spending reductions, hitting the global economy.

In the absence of any deal, the Pentagon will be forced to slice 13% of its budget between now and 30 September, Reuters reports.

Most non-defence programmes, from NASA space exploration to federally-backed education and law enforcement, face a 9% reduction.

If the cuts were to stay in place through September, the administration predicts significant air travel delays due to layoffs of airport security workers and air traffic controllers.

The non-partisan Congressional Budget Office predicts 750,000 jobs could be lost in 2013 and federal employees throughout the country are looking to trim their own costs.

Instead of the indiscriminate cuts, Mr Obama and Democrats in Congress have urged a mix of targeted spending cuts and tax increases on the rich to help tame the growth of a $16.6 trillion national debt.

Republicans want to cut the cost of huge social safety nets, including Social Security and Medicare, that are becoming more expensive in a country with an ageing population.

By midnight on Friday, the president is required to issue an order to federal agencies to reduce their budgets, and the White House budget office must send a report to Congress detailing the spending cuts. In coming days, federal agencies are likely to issue 30-day notices to workers who will be laid off.