America's sequester — an ugly word for a still uglier failure of the political process — is under way with damaging consequences. If the American executive branch and Congress cannot agree on a relatively simple thing like the budget, what hope is there of U.S. leadership on important matters? The fall in U.S. economic growth will also have a cascading damaging impact on the rest of the world and growth, job and trade prospects.
Alice Rivlin, the former vice chairman of the U.S. Federal Reserve, hit the nail on the head when she compared the struggle over U.S. budget cuts to a playground fight by schoolchildren. But while right, she is also dreadfully wrong — because there is no sign that the unruly brats are going to stop fighting any time soon. That is bad news for the world economy, but it also signals the beginning of the end of the U.S. economic imperium of the world.
President Barack Obama signed the order for an initial $85 billion of cuts to government spending under the sequester program. He warned that Americans face the loss of up to 750,000 jobs along with a 0.5 percent cut in economic growth, which will cause a "ripple effect" of pain, especially among the U.S. middle classes. "Businesses will suffer because customers will have less money to spend. These cuts are not smart," declared the president.
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