US Budget crisis

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The US Congress has adjourned for the weekend without reaching a deal to avert steep automatic budget cuts, reports small business accountants Harris & Co.

The cuts, worth $85bn (£56bn), are due to take effect on Friday. Democrats and Republicans are blaming each other for the deadlock.

President Barack Obama has invited congressional leaders to the White House for negotiations.

Mr Obama warned that the cuts will harm the economy. The IMF said they could have a global impact on growth.

On Thursday budget bills from both parties were defeated in the Senate.

The president accused Senate Republicans of allowing the cuts to proceed rather than "closing a single tax loophole that benefits the well-off and well-connected".

"They voted to let the entire burden of deficit reduction fall squarely on the middle class," he said in a statement on Thursday. There is seemingly no end to this toxic tale of cruel dismemberment and government by crisis”

The BBC"s Mark Mardell in Washington says the cuts are meant to hurt - they were deliberately designed two years ago to be so brutally painful that politicians of left and right would be forced to agree on a better way of balancing the books.

"Tumble downward"

The cuts - known as the sequester - are split roughly evenly between military and domestic programmes.

Without an agreement, they are scheduled to be worked into the federal budget by 23:59 local time on Friday (04:59 GMT on Saturday).

The president and his Democratic party are insisting that there should be some tax rises - but the Republicans who control the House of Representatives firmly reject this.

When Mr Obama signs an order later on Friday, a process to cut the defence budget by 10% and other programmes by 8.5% will be set into motion.


Social services and other agencies will not have their budgets slashed, but teachers and other employees will begin to lose their jobs as federal cash runs out

  • The Federal Reserve says the cuts would also hit the overall economy, knocking half a percentage point off GDP and pushing unemployment up
  • If a new temporary budget is not agreed by 27 March, some parts of the federal government may have to shut down

Millions of federal workers could face up to 22 forced days off without pay this year.

Our correspondent says the cuts will not happen overnight - they will be spread over the next seven months and many think Congress will agree to a deal sooner rather than later.

The Senate on Thursday failed to pass two separate plans to halt the cuts and replace them with other deficit reduction measures.

A Senate Democratic plan blocked by Republicans proposed nearly $30bn in future cuts in defence spending and a minimum tax rate on incomes exceeding $1m.

House Speaker John Boehner and House Democratic leader Nancy Pelosi, as well as the Senate"s Democratic majority leader Harry Reid and Republican minority leader Mitch McConnell are due to attend the White House talks on Friday.

Next budget battle

White House spokesman Jay Carney said there were "no preconditions" on what could be discussed in the meeting.

With Republicans refusing to allow tax rises and Democrats vowing to protect cherished social programmes, Congress is just weeks away from its next budget battle.

On 27 March a temporary budget that has kept the federal government running since the last budget ran out is due to expire.

Failure by Congress to enact a new stop-gap budget could see parts of the federal government shut down.

House Republicans said they would vote on a bill next week to fund the government through the end of the fiscal year but keep in place some automatic cuts taking effect on Friday.

Meanwhile the International Monetary Fund said the global economic recovery could be harmed by the automatic spending cuts,

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