President Barack Obama warns of upcoming tough decisions and more discussions as he expects an increase in unemployment following the $85 billion forced spending cuts. The specific areas to be cut are still to be detailed in the next few weeks. However, the administration is already expressing concerns on the fate of the economy.
For instance, the administration believes that a cut in the aviation budget would result in the staff no longer working overtime. This, in turn, would result in long queues for travellers. The Pentagon has even gone ahead and called for the cancellation of the deployment of a carrier group, which is supposed to be heading to Iran.
Administration: This is an “empty victory” for the Republicans
The administration blames the Republicans for not agreeing to a deal with the Democrats. Obama believes that the Republicans do not think that the effects of the budget cuts will be severe. Hence, they have closed their doors for talks on how to soften the blow of the $85 billion cut.
The issue on the budget cuts has been hanging since last year and until now, no resolution has been reached. The President has even postponed the implementation of the budget cuts from January to March of this year. With no resolution reached until the present, the President’s next step is still unknown.
Spending Cuts will Affect All Key Players of the Economy
Meanwhile, Obama assured his Cabinet that despite the cuts, all agencies will still get the support they need to perform their functions. This means that a close study of the areas that will be largely affected will be considered prior to the actual cut.
However, there is only so much that the Administration can do for the American families, who will be getting the final blow of all these run-arounds. Companies are likely to cut their production costs and that means shorter hours and few employees required. They might also need to freeze their hiring process. All these would result in higher unemployment.
Even the loan industry, which is said to be recession-proof, will also get its fair share of negative effects. If American families struggle to meet their day-to-day living requirements, they would naturally look upon loans. Non-credit based loans are easy to approach and are largely within reach. In the coming weeks and/or months, there will be an expected surge in the applications submitted for bad credit loans. However, the default rates will likely be high.
So unless an agreement between the Republicans and the Democrats is reached, all the key players of the American company will suffer the effects of the budget cuts.