Were Democrats and Republicans too polarised to hammer out a grand bargain before massive spending cuts kicked in on Friday? Or was it a deeper realisation that fiscal austerity was an inescapable, and necessary, bitter medicine for an overdrawn national balance sheet?
Either way, the federal government has failed to put in place an alternative deficit reduction plan to the $85-billion sequester, which will now generate across-the-board cuts affecting everything from military expenditure to school and hospital services. Almost as a sign that they admitted defeat, members of Congress on Thursday halted efforts to press on with negotiations and decamped from Capitol Hill for the weekend.
Though President Barack Obama was scheduled to meet Congressional leaders on Friday, “expectations for the meeting are low”, according to reports; and Republicans were said to be “turning their attention to the next deadline on March 27, drafting a measure that would avoid a government shutdown while leaving the sequester in place through the end of September”.
Meanwhile, the White House firmly rejected a Senate bill proposed by the Republicans, with Press Secretary Jay Carney describing it as “the worst of all worlds”. He said in a briefing that their bill explicitly protected “pork-barrel projects and every single tax loophole that benefits the wealthy, but puts on the table cuts to things like Medicare and education, forcing middle-class families to bear the burden while asking nothing from the wealthiest Americans”.
Rather than solve the problem, this made it worse, he added.
While most economists expect the sequester to have a tangible impact on federal and local government agencies, with knock-on effects in the private sector, the fiscal tightening may not be felt in the immediate term and it may be a matter of months before it works its way through the multi-tiered government system in Washington and elsewhere.