America's next fiscal melodrama

Just as political risk returned with a vengeance in Europe, US politics edged back into the spotlight too. This week US politicians continued to row over the sequester', a slate of spending cuts designed to begin tomorrowto reduce the US budget deficit by $1.2trn over the next ten years.

The cuts are divided equally between the military and civilian parts of the budget and imply a $85bn spending squeeze this year. The sequester was designed in August 2011 and meant to be so painful that Congress would be forced to come up with a better deal to tackle the deficit. It didn't.

What the commentators said

What an absurd way to run a government, said Michael Gerson in The Washington Post. Sequestration indiscriminately slashes essential and inessential services alike, including farm subsidies and treatment for Aids patients. And it ignores the main reason America's debt is rocketing: entitlement programmes such as Social Security.

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The latest stand-off thwarting a deal to replace the sequester has involved the Democrats suggesting targeted cuts, reforms to Medicare (healthcare for the old) and raising revenues by closing tax loopholes. The Republicans insist on spending cuts only. Most estimates suggest that the sequester could reduce GDP growth this year by over 0.5%.

The cuts imply that the Pentagon will have to put most of its civilian employees on leave without pay, while "everything from inspections of meat-packing plants to child-care" could be disrupted, said The Economist. But the sequester could be largely avoided.

Congress, "with its penchant for fiscal melodrama", may let the sequester go into effect for three weeks and then undo the package. That's because a law allowing the federal government to spend non-entitlement money expires on 27 March and a new, bigger agreement on spending is expected.

The upshot, however, said Richard McGregor in the Financial Times, is that "the rolling budgetary battles" that do nothing to deliver a long-term solution to America's debt problem look set to continue. America "governs by crisis these days".