Boston, MA 02/25/2013 (wallstreetpr) – The U.S is being threatened to be pushed back into a fiscal crisis similar to the Great Depression. Sequestration or federal budget cuts are looming high over a country that is already reeling under job cuts and inflation. Democratic and Republican governors who had converged in Washington last weekend for a National Governors association meeting said that the President and the Congress will have to find an immediate solution for the proposed $85 billion federal cuts. Very simply put these cuts will mean that firefighters and teachers face large-scale dismissal. Half of the cuts will have to come from domestic spending while the other half will come from defense spending. The governors have been quoted to state that if President Barack Obama and the lawmakers do not reach a consensus very soon, the already-damaged economy is bound to worsen and jobs are going to get affected.
Some states more affected
The U.S economy took a sudden dive in the fourth quarter and logged its worst performance since 2009 which was the year in which the country had faced a recession. The cuts would be more marked in states such as Hawaii, Virginia and Maryland where there was higher federal spending. The Virginia governor has already raised the red flag. Maryland receives medical research grants, federal employment and contract spending and thus may lose close to 12,000 jobs. The state-administered programs may see a reduced federal spending in the range of $5.8 billion though state road funding and state healthcare programs for the needy that have federal backing are exempt from cuts.
Tough times ahead
Federal officials have already sent out warnings about budget cuts and the resultant hardships that consumers, federal workers and certain government aid recipients would be put through. The Pentagon would have to lay-off close to 800,000 civilian employees and have them take forced unpaid time off. The 2009 recession had seen workers being fired by state leaders and spending had been pared to offset any shortfall in the state budgets. The drag that it created on the economy had its effects till the third quarter of 2012.
The harm of uncertainty
Republican governor Mary Fallin of Oklahoma has said that both, the state and national economy is being harmed by sequestration threats. Close to 20,000 jobs stand to be lost in her state where businesses are already wary about investing due to the doubts that have been raised due to the federal budget. The general opinion of the democrats and the republican governors is that Obama should be addressing the issue with them on an urgent basis. They have also opined that the public needs to understand the criticality of the impending cuts and a reaction from them may lead to some immediate relief.
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