AMERICAN government spending is facing an automatic hit of $85bn (£56bn) in cuts as Congress appears unlikely to reach a compromise over the budget before a deadline that expires tonight.
Unless a deal is reached by midnight (5am Saturday morning in the UK) the cuts will kick in for various federal budgets.
The initial $85bn applies to the next seven months, yet the total amount of automatic cuts – known as sequestration – would be $1.2 trillion over the subsequent decade, unless politicians come up with an alternative budget plan in the meantime.
The US military finds itself directly in the firing line, with defence cuts expected to amount to $46bn for the remainder of America’s fiscal year.
Defence firms that rely on US contracts are braced to take a hit due to the imminent tightening of purse strings in Washington DC.
Observers had hoped that Democrats and Republicans would reach a deal over the shape of budget cuts in order to prevent the sequestration from kicking in, yet the feuding sides have failed so far.
The sequestration was put into law in 2011 as part of a bipartisan solution to an earlier fiscal emergency in the US, where the national debt has reached around $16.6 trillion.
“It is the President’s sequester. It was his team that insisted upon it," Republican House speaker John Boehner said. Democrats accused the GOP of trying to protect tax loopholes for the wealthy.