Obama signs sweeping US budget cuts into effect

[busybeeburns]

 

Obama signs sweeping US budget cuts into effect

 

US President Barack Obama has signed into effect a wave of steep spending cuts which he has warned could damage the US economy.

 

The cuts - known as the sequester and drawn up two years ago - will take $85bn (£56bn) from the US federal budget this year.

 

Last-ditch talks at the White House to avert the reductions before Friday's deadline broke up without agreement.

 

The IMF has warned the cuts could slow global economic growth.

 

The BBC's Mark Mardell in Washington says the cuts were designed to be so brutally painful that politicians would be forced to agree on a better way of balancing the books.

 

However, as the midnight deadline loomed on Friday, Mr Obama and Republican congressional leaders still failed to agree on a way to avoid them.

 

The two sides are at odds over the president's insistence on raising taxes as part of any plan for tackling the country's $16.6 trillion (£11tn) debt.

 

After the White House talks broke up, Mr Obama blamed Republicans for the impasse.

 

"They've allowed these cuts to happen because they refuse to budge on closing a single wasteful loophole to help reduce the deficit," he said.

 

He warned the cuts - if fully realised - would slow US economic growth by half of 1% and cost 750,000 jobs.

 

"We shouldn't be making a series of dumb, arbitrary cuts to things that businesses depend on and workers depend on," he said.

 

The sequester was drawn up in mid-2011 as Congress and the White House feuded over raising the debt ceiling and how to slash the huge US deficit.

 

Republicans wanted deep cuts in spending while Democrats insisted on raising taxes.

 

At the end of 2012 Congress and the White House struck a dramatic deal to avoid what was dubbed the "fiscal cliff", that included expiring tax breaks and the sequester.

 

Republicans agreed to Mr Obama's demand to raise taxes for the rich and Congress postponed the deadline for the budget cuts until 1 March.

 

About half the cuts will come from the defence budget. Incoming defence secretary Chuck Hagel has warned of "significant impacts" on the military.

 

He said the cuts "will cause pain, particularly among our civilian workforce and their families".

 

"Let me make it clear that this uncertainty puts at risk our ability to effectively fulfil all of our missions," Mr Hagel said.

 

"Later this month, we intend to issue preliminary notifications to thousands of civilian employees who will be furloughed [put on unpaid leave]."

 

Defence officials say 800,000 civilian employees will have their working week reduced. They say they will also have to scale back flight hours for warplanes and postpone some equipment maintenance.

 

The deployment of a second aircraft carrier to the Gulf has also been cancelled.

 

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

 

"Let's make it clear that the president got his tax hikes on 1 January," he said as he left the White House. "The discussion about revenue, in my view, is over. It's about taking on the spending problem."

 

Correspondents say attention will now turn to the next congressional challenge - a possible shutdown of the US government if no funding bill is passed in the next month.

 

On 27 March a temporary federal budget that has kept the federal government running since 2012 is due to expire.

 

House Republicans have said they will vote on a bill next week to fund the government through the end of the fiscal year, on 30 September, but keep in place some automatic cuts taking effect on Friday.

 

http://www.bbc.co.uk/news/world-us-canada-21638727

[Coeurli]

Omg thanks Ian! For English class I have to make a presentation about Republican and Democratic America. I heard about this yesterday and it's like the perfect example. The article is a great source so thanks for saving me some time :cheesy:

 

But uh....yeah very sad to hear that for my American friends

hang in there ~

[busybeeburns]

Q&A: What are the 'sequester' budget cuts

 

The US Navy has delayed a long-planned overhaul of the aircraft carrier USS Abraham Lincoln as a result of the budget uncertainty

 

Q&A: What are the 'sequester' budget cuts

 

On Friday, a series of broad automatic budget cuts known in Washington DC as the sequester are expected to take effect, hitting many areas of the federal government if Congress does not act.

 

What is the sequester?

 

"Sequester" is Washington DC jargon for a series of spending cuts totalling $85bn (£56bn) this year and $1.2tn over 10 years. It is scheduled to take effect on Friday.

 

Why is it happening?

 

The cuts were created in negotiations over a 2011 bill that raised the US debt ceiling, the legal limit that America is allowed to borrow to fund its budget deficit.

 

Composed of blunt budget cuts across areas of key interest for both Democrats and Republicans, they were designed to be unappealing. They were meant less as a budget reduction tool and more as a cudgel to prod Congress to find a better way to plug America's roughly $1tn budget deficit.

 

Under the 2011 plan, the sequester would only take effect on 1 January 2013 if Congress failed to devise its own package of $1.2tn in deficit savings, whether through tax rises or budget cuts.

 

With the 2012 presidential election taking shape, Congress failed to act until 1 January 2013, in a deal that raised tax rates on incomes over $400,000 and postponed the sequester until 1 March.

 

What is to be cut?

 

The cuts are roughly evenly divided between military and domestic spending. Agency heads may not protect certain programmes deemed essential in order to take larger hits in other areas.

 

Many mandatory programmes like the Social Security pension programme, Medicaid healthcare for the poor, food aid, and others will not be affected. In recent days, President Barack Obama and his cabinet officials have warned of harmful impacts on:

 

• Medical research
  
• Education budgets
  
• Military readiness
  
• Services to victims of domestic violence
  
• Vaccines for children
  
• Food safety, as meat inspectors are taken off the job
  
• Queues at border crossings
  
• Airline travel and aviation security
  
• How bad will it be?
  

 

President Obama has warned the cuts will slow the US economy, eliminate jobs, and "leave many families who are already stretched to the limit scrambling to figure out what to do".

 

The Pentagon has also sounded the alarm, having already begun cutting 46,000 temporary workers and saying it will force staff to take one unpaid day off per week starting in April.

 

Some senior Republicans, meanwhile, are downplaying the threat. "I don't believe the world will end," Senate Minority Leader Mitch McConnell said on Tuesday.

 

What will happen after the deadline?

 

The cuts to the federal budget will not hit all at once. Many actions planned by agencies cannot take effect immediately and the cuts will ramp up through the year. The Republican-controlled House of Representatives has twice passed bills to replace the sequester with other cuts.

 

But many of the cuts included in the House bill are unacceptable to Senate Democrats and Mr Obama, who have unveiled their own proposals to replace the sequester with spending cuts and tax increases. Republicans say they will oppose any tax rises.

 

Correspondents say that many in Washington DC expect a deal will come after 1 March, as the outcome of the cuts becomes more apparent. But another fiscal deadline looms in late March, when the continuing resolution that has served as the federal government's working budget for the past year expires.

 

If a new budget or temporary resolution is not in place by 27 March, much of the federal government will shut down.

 

http://www.bbc.co.uk/news/21589927

[busybeeburns]

I accidentally clicked on the wrong menu and now have USS Abraham Lincoln as my background :dozey:

[the_gloaming09]

The problem is that these cuts aren't really cuts in the sense that it's reducing the debt. The cuts are really just cuts to increases in spending. So we would have spent more for 2013 than we did in 2012 regardless of if these cuts go into effect or not.

 

What I find most incredible about this is how the sequester was to go into effect to get the US budget under control and try to fix this problem. On top of that it was also put into place when we expanded our debt limit. To go back in 2011 we had the so called crisis built up that if we didn't expand our debt limit we would default. When they increased our debt limit they put into place and essentially told all people buying our debt that we would reduce spending and would have cuts. But as we've seen with the fiscal cliff and now this, the US has no intentions of either paying back it's debt or reducing it's spending.

 

As always it's nothing but fear mongering to scare the public and get people to contact their representatives to pass this. People need to wake up and see that this country has a massive spending problem that needs to get controlled. Are there going to be hard times to control spending? Of course, but perhaps if the people paid more attention to what their taxpayer money went to and had more of a voice things might be different.

 

Also another little fun fact to people who think the sky is falling with this. The federal reserve buys a total of $85 billion (the same amount that is to be cut), in US treasuries and mortgage bonds per month

...of course that isn't something that makes it to the news...

[Black Rose]

Hopefully these cuts will help stop the dollar rising against the pound, but I doubt it :(

[the_gloaming09]

Prices will continue to go up regardless of these cuts.

[NumbersGirl]

And of course the whole "fiscal cliff" thing is going to rear its ugly head again at the end of this month. They just kicked the can down the road when it came up a few months ago.

 

These "cuts" (or "not increases", as Mike pointed out), need to be reigned in big time. Maybe this whole thing will be good in the long run. Although some of the cuts may seem ridiculous, if things don't end up being all doom-and-gloom, maybe it will open up their eyes and they'll realize that plenty of other things can be successfully cut.

[the_gloaming09]

And of course the whole "fiscal cliff" thing is going to rear its ugly head again at the end of this month. They just kicked the can down the road when it came up a few months ago.

 

These "cuts" (or "not increases", as Mike pointed out), need to be reigned in big time. Maybe this whole thing will be good in the long run. Although some of the cuts may seem ridiculous, if things don't end up being all doom-and-gloom, maybe it will open up their eyes and they'll realize that plenty of other things can be successfully cut.

 

Not even the fiscal cliff, you have the debt ceiling too! I'm really surprised that our creditors around the world are still playing this ponzi scheme debt game. We're basically telling the world, "we have been borrowing money to pay off the interest on previous loans, so please keep letting us borrow more to pay off the loan". It's insanity!

 

To be honest I'm not very hopeful at all. We have becoming a consumer country and not a producer country at all. We make barely anything in this country and just purchase goods from the rest of the world. How are we supposed to increase our income if all jobs are overseas?

 

And the $16 trillion in debt is for funded projects! It's not even taking into consideration the nearly $123 trillion in unfunded liabilities (aka future promises) for things like medicare, prescription drugs and social security!

 

Our country is in serious trouble, yet so few people actually realize what is going on which is scary. One day all of these debts are going to catch up to us and people will be in for a big surprise when the prices of things go through the roof.

 

Sorry for the long or doom and gloom post, but I don't see a lot of hope to turn things back around.

 

 

edit: this is also neither a democrat or republican problem or a bush or obama problem. The problem has been around for a while and has progressively been getting worse with more intervention to put a band-aid on the wound rather then doing full surgery. If anything I say the real problems started with Nixon who took us off the gold standard to a fiat currency (to fund Vietnam), thus opening pandora's box for out of control spending. All fiat currencies in human history have gone to zero and failed, and now we're starting to see our dollar do the same.

[NumbersGirl]

And this won't help at all...

 

 

 

 

Congressional Democrats seek to raise minimum wage

 

WASHINGTON (AP) - House and Senate Democrats want to raise the minimum wage to $10.10 an hour, more than a dollar higher than President Barack Obama proposed in his State of the Union address.

 

Iowa Sen. Tom Harkin and California Rep. George Miller say their bill, introduced Tuesday, would boost the minimum from its current rate of $7.25 an hour by 2015. It then calls for automatic annual increases tied to changes in the cost of living.

 

Obama's proposal last month called for an increase to $9 an hour, but Harkin says that doesn't go far enough.

 

The lawmakers say a hike in the minimum wage would help lift millions of workers out of poverty and boost the economy. But top Republicans have rejected the idea, saying it would hurt employers.

 

 

link

[the_gloaming09]

And this won't help at all...

 

 

 

 

Congressional Democrats seek to raise minimum wage

 

WASHINGTON (AP) - House and Senate Democrats want to raise the minimum wage to $10.10 an hour, more than a dollar higher than President Barack Obama proposed in his State of the Union address.

 

Iowa Sen. Tom Harkin and California Rep. George Miller say their bill, introduced Tuesday, would boost the minimum from its current rate of $7.25 an hour by 2015. It then calls for automatic annual increases tied to changes in the cost of living.

 

Obama's proposal last month called for an increase to $9 an hour, but Harkin says that doesn't go far enough.

 

The lawmakers say a hike in the minimum wage would help lift millions of workers out of poverty and boost the economy. But top Republicans have rejected the idea, saying it would hurt employers.

 

 

link

 

People think that it's great if you do that but it just makes it worse. Firstly employers are going to do 2 things when that happens. a. they won't hire as many people since it's more expensive and b. are going to raise prices of their products. Not only that but it'll help to lead to even more outsourcing which means even fewer products will be produced in this country.

 

If anything what we need is less minimum wage to get employers to want to hire here. Or I say even better yet give tax breaks to companies that hire permanent workers here and keep them. If they outsource then they get no tax break.

[Black Rose]

People think that it's great if you do that but it just makes it worse. Firstly employers are going to do 2 things when that happens. a. they won't hire as many people since it's more expensive and b. are going to raise prices of their products. Not only that but it'll help to lead to even more outsourcing which means even fewer products will be produced in this country.

 

If anything what we need is less minimum wage to get employers to want to hire here. Or I say even better yet give tax breaks to companies that hire permanent workers here and keep them. If they outsource then they get no tax break.

 

No minimum wage = companies will try and get away with paying hardly anything. Be thankful you've got a job as a cleaner getting paid $4 an hour.

[the_gloaming09]

No minimum wage = companies will try and get away with paying hardly anything. Be thankful you've got a job as a cleaner getting paid $4 an hour.

 

ok. Then why is it that companies are hiring workers outside of the US? Why is the US no longer a product producing country?

 

My point is... does it suck to get paid that little? yes. But overall there are people that will work those jobs. And why should American companies hire workers in the US if they can get them for 1/2 the price? I'm not saying it's right but that's what's been happening. Companies will go for the cheapest labor around, so that means less earning for people living in the US and more to other countries.

[Navegador]

No minimum wage = companies will try and get away with paying hardly anything.

If that is true, what's stopping the companies from paying everyone only the minimum wage?

[Coeurli]

If that is true, what's stopping the companies from paying everyone only the minimum wage?

Motivating your employees, for instance, is very often done by offering a satisfying salary, from the start and after some years of experience in te company (+some bonuses, commissions...etc when you're a salesrep or a trader for instance). If companies want their employees to manage to bring much more money (by bringing clients etc) into the company, they will pay them more. Also people don't have the same diplomas, and i don't know about other countries, but when a company is big, in France, they often have salaries' grids, and they're often based on your level of diploma.

 

Motivation is one key factor to productivity (i'm not just saying that, i mean there are studies, led by experts and sociologists and specialists of work methods etc, and i learned that in class), which is why companies are ready to pay their employees more than the minimum wage.

 

Also, if in France companies were to pay everyone only the minimum wage, *everyone* would go on strike, so companies don't do that. :cheesy:

 

edit: Forgot to add something: if they're not paying everyone the minimum wage, it doesn't mean they would get everyone a decent salary if they didn't have to, by law. If there was no minimum wage at all, you would get people at the bottom of the chain who wouldn't get paid at all, or barely, because companies mostly recognize the ones who bring the most money.

 

That said, I admit that Democrats saying, right now, that they want to raise the minimum wage, is a bit of a provocation when everyone should be making sacrifices, both Republicans and Democrats. It is sad to see the parties both seem to stand still on their ideological points of view, when the deficit and debt's situation is that critical. It's like that in my country too, very often. When it comes to saving a country from bankruptcy, they all start having big important principles.

 

There's something I don't get though: "It then calls for automatic annual increases tied to changes in the cost of living."

Do they mean that this is the reason why they want to increase minimum wage, or that, after a raise, they'd also like to set an automatic increase ?

[Navegador]

Motivating your employees, for instance, is very often done by offering a satisfying salary, from the start and after some years of experience in te company (+some bonuses, commissions...etc when you're a salesrep or a trader for instance). If companies want their employees to manage to bring much more money (by bringing clients etc) into the company, they will pay them more. Also people don't have the same diplomas, and i don't know about other countries, but when a company is big, in France, they often have salaries' grids, and they're often based on your level of diploma.

What does this have to do with what I said?

[Coeurli]

Didn't you ask why wouldn't companies pay everyone the minimum wage ? :thinking:

[Navegador]

Didn't you ask why wouldn't companies pay everyone the minimum wage ? :thinking:

It was a rhetoric question. Black Rose said that, if there wasn't a minimum wage, companies would pay extremely low salaries, but if that was true, companies would pay everyone the minimum wage.

[Coeurli]

It was a rhetoric question. Black Rose said that, if there wasn't a minimum wage, companies would pay extremely low salaries, but if that was true, companies would pay everyone the minimum wage.

No, they wouldn't, because with a minimum wage, people don't only work to survive and feed their family anymore. To be more productive, they have to be motivated. Companies motivate them by paying them differently, and over the minimum wage. That's what I meant to say in my post.

[Navegador]

No, they wouldn't, because with a minimum wage, people don't only work to survive and feed their family anymore. To be more productive, they have to be motivated. Companies motivate them by paying them differently, and over the minimum wage. That's what I meant to say in my post.

That's what I meant too :rolleyes:

Anyway, the iron law of wages is false.

[para-para-parrotdies]

No, they wouldn't, because with a minimum wage, people don't only work to survive and feed their family anymore. To be more productive, they have to be motivated. Companies motivate them by paying them differently, and over the minimum wage. That's what I meant to say in my post.

 

What's the highest level of economics you have taken?

[Coeurli]

That's what I meant too :rolleyes:

:thinking:

 

Wait I'm still not sure we're on the same page here.

When I said "no they wouldn't", i didn't mean "they wouldn't pay everyone with low salaries", i meant "no they wouldn't pay everyone the same wage" .

I agree with Black Rose.

Now, i'm sorry if i didn't get what you said right. My bad.

 

 

And to the parrot: not very high obviously, basic stuff compared to what college students majoring in economics learn, mostly theories and mechanisms (in high school my major was economics). Atm I study Business. I don't see how my background is very important here (unless you're making fun of me, which i guess you are and i'd rather you'd straightly go the point thank you), but ok.

 

Companies don't only motivate people with money, but that's the most common, basic, most used motivation tool.

[Navegador]

When I said "no they wouldn't", i didn't mean "they wouldn't pay everyone with low salaries", i meant "no they wouldn't pay everyone the same wage".

I agree with Black Rose.

Wages, like everything in the market, are ruled by supply and demand laws. If the demand for workers in a profession is higher than the supply, the prices will go up until an equilibrium is reached; if the demand for workers in that profession is lower than then supply, the prices will go down until an equilibrium is reached.

 

Setting a minimum wage generates unemployment. Some will get a raise, of course, but others will be deemed unworthy of a raise and will end up getting fired.

 

I'm not sure I gave the best explanation I could, I'm not fluent in English.

[Black Rose]

If that is true, what's stopping the companies from paying everyone only the minimum wage?

 

Basic jobs, ie retail staff, cleaners, kitchen porters will get min wage.

 

Skilled jobs are more valuable for companies, also supervisors need a bonus.

 

In the UK, there is 4 min wages, 1 for 16/17s, 1 for 18 to 21s, 1 for over 21s, and a training wage.

 

Some companies go out of there way to hire youngsters so they can get away with paying a lower wage. Thankfully I work for a company where all the entry level unskilled jobs gets the highest min wage at the least, even a 16 year old.

[Navegador]

Basic jobs, ie retail staff, cleaners, kitchen porters will get min wage.

The supply is higher than the demand, therefore the wages tend to go down. What's wrong with that?

 

Like I explained before, setting a minimum wage generates unemployment.