WITH Congress adjourned for the weekend, US President Obama was holding last-minute talks with Republican and Democratic leaders at the White House yesterday evening in a desperate attempt to avoid having to sign in savage automatic budget cuts at midnight local time last night.
This was after the Senate rejected budget bills from both parties, which would have avoided cuts of $85bn (£56bn), originally tabled in November in a bid to force an agreement.
The IMF has said the cuts would have a huge impact on the world economy, with US growth slumping to just 1.4 per cent in 2013 if the cuts are not delayed or replaced.
The AFL-CIO union federation has warned the cuts will see 750,000 jobs destroyed.
Federal employees also face being laid off without pay for periods of a fortnight.
The White House estimates the crisis will mean a cut in aid to schools, equivalent to the salaries of 10,000 teachers and 7,200 specialists for children with disabilities.
An additional 14,000 teaching positions would be lost, after excluding about 70,000 children under the age of five from the Head Start pre-school programme.
There will be huge cuts in the child vaccination programme, and 12,000 scientists and students will be affected due to cuts in fedderally-funded health research.
Defence faces losing up to $46bn this year. Around 800,000 civilian employees at the Defense Department will have their workweek cut by one hour as well as a 20 per cent wage cut.
Federal employees union NTEU has warned: ‘These cuts will have devastating impacts on CBP’s (Customs and Border Agency) dual missions of securing our borders and facilitating trade and travel.’
Obama favours what he calls a ‘balanced’ approach to deficit reduction, mixing cuts with tax rises for some Americans.
In a statement on Thursday attacking Senate Republicans, he said: ‘They voted to let the entire burden of deficit reduction fall squarely on the middle class.’
The Federal Reserve says the cuts would also hit the overall economy, knocking half a percentage point off GDP and pushing unemployment up.
If a new temporary budget is not agreed by 27 March, some parts of the federal government may have to shut down permanently.
