New global meltdown fear as 56 billion US cuts kick in

New global meltdown fear as 56 billion US cuts kick in Multi-billion-dollar spending cuts will particularly hit the US military Pentagon will absorb half of the cost of cuts required before SeptemberInternational Monetary Fund warns the measures could spark a new global economic crisis

By
Sharon Churcher

PUBLISHED:

01:47 GMT, 3 March 2013

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UPDATED:

01:47 GMT, 3 March 2013

Barack Obama yesterday set in motion a multi-billion-dollar spending cuts programme that will particularly hit the US military after failing to reach a compromise with his Republican opponents.

The cuts – described by the US President as ‘dumb’ – are designed to whittle away America’s $16.6 trillion debt.

However, the International Monetary Fund has warned the measures could spark a new global economic crisis.

Tough measures: President Barack Obama yesterday set the spending cuts programme in motion

Tough measures: President Barack Obama yesterday set the spending cuts programme in motion

The Pentagon will absorb half of the $85 billion (56 billion) required to be saved before September.

It means civilian workers face being made redundant and some defence contracts will be cancelled.

The White House has also warned of long queues at US airports as security staff are laid off, while teachers are set to lose their jobs.

President Obama and Republican leaders in the House of Representatives and Senate are at odds over the White House’s insistence on increasing taxes as part of any plan for attacking the massive debt.

Crude, across-the-board cuts were drawn up two years and were meant to be so unattractive that Democrats and Republicans would be forced to find a better deal.

Impasse: House Speaker John Boehner said there will be no compromise while Obama insists on higher taxes

Impasse: House Speaker John Boehner said there will be no compromise while Obama insists on higher taxes

However, there has been an impasse ever since and the President signed into effect the cuts on Friday night.

The measures apply to the remainder of the current fiscal year, which ends on September 30.

But legislation that requires the reduction will continue slashing government spending by about $1 trillion more over a ten-year period.

‘Let’s be clear. None of this is necessary. It’s a choice Republicans in Congress have made,’ said the President after last-ditch White House talks failed to break the deadlock.

Senior Republican John Boehner said later that there would be no compromise as long as Mr Obama insisted on higher taxes.