Tue, July 31, 2012

White House braces agencies for looming budget cuts

2012-07-31 22:05:14 GMT2012-08-01 06:05:14(Beijing Time)  Xinhua English

WASHINGTON, July 31 (Xinhua) -- The White House said Tuesday said that it is preparing federal agencies for looming automatic budget cuts that's set to take effect next year if Congress failed to act.

In a memorandum, Jeffrey Zients, director of White House Office of Management and Budget (OMB), said the 1.2-trillion-dollar automatic cuts, called sequestration, would be "highly destructive to national security and domestic priorities". He said because the Congress has not yet made progress towards enacting sufficient deficit reduction to avoid sequestration, his office "will work with agencies, as necessary, on issues raised by a sequestration of this magnitude."

Zients said OMB will hold discussions with federal agencies over the coming months, and topics will include which programs would be exempted from sequestration.

Over the longer term, in the absence of Congressional action on a balanced deficit reduction plan in advance of January 2, 2013, Zients said the OMB will undertake additional activities related to sequestration, such as sequestrable amounts from each agency.

According to the Budget Control Act of last year, a bipartisan super-committee must find 1.2 trillion in budget cuts, or a sequestration of the same amount will come into effect. The sequestration mechanism cuts evenly to national security and social programs. Since the super-committee failed in its task, the automatic cuts are to take effect in the beginning of next year if Congress cannot act to stop it this year.

Nearly all in Washington acknowledged sequestration is bad policy, as it is designed to be so onerous that Congress has every reason to avoid it. It is also predicted to hit employment and economic growth. But so far the Congress have failed to act.


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