Fed Chief Warns of Economic Headwinds From Budget Stalemate
February 26, 2013
Some $85 billion in automatic spending cuts will kick in Friday unless Congress and the Obama administration can agree on an alternate plan to reduce the deficit. "Sequestration," as it's called, was initially agreed upon as a threat to force lawmakers to reach a compromise. But U.S. Federal Reserve Chairman Ben Bernanke warned Tuesday that without a deal soon, the massive spending cuts pose a significant threat to the U.S. recovery.
With no progress in Washington to avoid looming spending cuts, Federal Reserve Chairman Ben Bernanke warned lawmakers that inaction would sharply slow U.S. economic growth.
"Moreover, besides having adverse effects on jobs and incomes, a slower recovery would lead to less actual deficit reduction in the short run," said Bernanke.
Despite the high stakes, the action from Washington has been mostly - finger pointing.
Republican House Speaker John Boehner says it's time for the president and the Democratically controlled Senate to take the lead.
"The House has acted twice. We shouldn't have to act a third time before the Senate begins to do their work," said Boehner.
The automatic spending cuts, roughly three percent of the federal budget, would slash defense spending and affect government services from border security to meat inspections.
The White House wants a more balanced approach that includes cuts and higher taxes.
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