Spending Cuts goThe US government will experience spending cuts that could affect the economy and limit military readiness as President Barack Obama and leaders of Congress failed to compromise on an alternative budget plan. The automatic budget cuts were placed during the budget negotiations in 2011 and can only be stopped by a deal between the White House and Congress.

Talks last Friday resulted into nothing and that means government agencies will now cut a total of $85 billion from their budgets starting Saturday until October 1. Financial markets were unaffected by the stalemate in the budget negotiations in Washington.

Democrats predict that the sequestration could cause delays in air-traffic, disruption to education and layoffs for thousands of federal workers. New US Defense Secretary Chuck Hagel said the cuts will put the Pentagon’s missions at risk.

The International Monetary Fund warned that the spending cuts could slow the economic growth of the United States by 0.5 of a percentage point in 2013. It would not be a large drag on the economy that has picked up steam in recent months.

President Obama said that even if the spending cuts are in place, Americans will work hard to keep the recovery of the economy going. He made the statement after his meeting with Democratic and Republican congressional leaders.

The two parties disagreed on how to reduce the budget deficit and the $16 trillion national debt that has bloated over the years by the government stimulus as well as the wars in Afghanistan and Iraq. President Obama wants to cut the fiscal gap via tax increases and spending cuts. Republicans don’t want another round of tax increases after giving up higher taxes for the rich during the fiscal cliff deal.

The full effect of the automatic spending cuts will be felt over seven months. Congress can stop the cuts at any time if the White House and Republicans can agree on a compromise.