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What to Know about the Automatic Spending Cuts

March 5, 2013
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March 4 (Bloomberg) -- Across-the-board spending cuts to U.S. defense and domestic programs, known as sequestration, took effect on March 1. It will be a few weeks before the full effects are felt by federal agencies, defense contractors and the public. This gives negotiators more time to strike a deal.

Here are questions and answers about the cuts and the status of budget talks in Washington:

 

What happened March 1?

Automatic cuts, half affecting defense spending and the remainder spread over other federal agencies, went into effect. The federal government is reducing spending by $1.2 trillion over the next nine years, including $85 billion over the final seven months of this fiscal year.

 

What are the potential economic implications of the cuts?

The nonpartisan Congressional Budget Office estimates that the automatic budget reductions, if they are not stopped, will cause a 0.6 percentage-point reduction in U.S. economic growth this year. Federal Reserve Chairman Ben S. Bernanke told the Senate Banking Committee on Feb. 26 that "this additional near- term burden on the recovery is significant."

The median forecast of economists surveyed by Bloomberg last week calls for a loss of 0.5 percentage points from the gross domestic product and 350,000 U.S. jobs.

 

How will federal agencies be affected?

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RELATED TOPICS: Policy, Economy

 
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COMMENTS (2 Comments)

KEVIN - HALLSVILLE, MO
Spending cuts have already kicked in for the farmers, went to the FSA office to check on the SURE payment progress and was told all payments were on hold THIS MEANS FARMERS WITH DISASTER PAYMENTS COMING ARE NOT GOING TO GET THEM !!! WONDER IF FOOD STAMPS AND WELFARE PAYMENTS ARE AFFECTED???? OR THE PAYMENTS TO EGYPT MUSLIM BROTHERHOOD 250 MILLION OR PAYMENTS TO SYRIA 85 MILLION OR ANY OTHER FOREIGN AID PAYMENTS ARE AFFECTED JUST WANDERING--------WHAT DO YOU THINK???????????????
7:16 AM Mar 5th
 
guidoLaMoto - chicago, IL
Pure bull. The $85B in "cuts" is equal to 0.5% of the GDP, but is not "taken out" of the GDP because it's money that was to be borrowed & therefore, not already "in" the GDP. ..Nobody need lose a job unless Obama wants them to, in order to inflict pain on us for political purposes. Again, this is because the govt will still spend more next yr, even with these "cuts." The $42B to be cut this yr is only 1% of Fed spending, so only 1 in 100 meat inspectors or TSA agents, etc would have to be fired. Would that wreck havoc on us? Isn't there at least 1% waste in their spending that they could cut without us missing it?
5:04 AM Mar 5th
 



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