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Washington prepares for budget cuts

Unless a deal is cut by midnight (NZ time), immediate spending cuts will start on January 2, the beginning of the fiscal cliff.

Talks are continuing in Washington DC this weekend, with most of the focus of the Congress and the White House on preventing tax rates from increasing on most workers, extending emergency unemployment benefits to roughly two million Americans and on preventing deep cuts in Medicare payments to doctors.

But another high priority, which appears thornier to resolve, is the $US110 billion in annual spending cuts that were put in place last year and are set to begin on Wednesday (US time) and continue for eight more years.

These so-called sequester cuts are a product of the 2011 Budget Control Act, the last-minute agreement between Congress and the White House that raised the debt ceiling in exchange for roughly $US2.1 trillion in budget savings over 10 years.

The cuts were in response to growing unease about the country's growing debt, driven by large deficits that have persisted over the past four years. The sequester cuts were designed to force Democrats and Republicans alike to find replacements before they went into effect.

Now, with political solutions hard to fashion, the cuts could go into effect, at least initially, forcing Congress and the White House to revisit the issue next year.

The cuts would equal roughly $US110 billion in spending reductions between January 2, 2013, and September 30, 2013, representing the final three quarters of the current fiscal year.

The cuts would continue for eight subsequent years, split between defence spending and other domestic programmes, including reductions in some Medicare spending. The cuts include embassy security, education, housing and transportation programmes.

Comments and questions

More service cuts for the middle class, working class and the poor.
Saying that there is a fiscal cliff to make cuts is pure bullshit. I don't see the trillions spent on wars, weapons, bank bailouts,wall st, bonuses and big pharma subsidies taking any cuts due to "fiscal cliffs".

Keep watching - you will.