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US President Barack Obama has cautioned that the looming automatic spending cuts or sequestration beginning March 1 will badly hit the country's economy and weaken the global economy.
"This is going to be a big hit on the economy," Obama said in his address to the Business Council on Wednesday night ahead of the so called sequester that will trigger a USD 85 billion in spending cuts.
"Both private sector as well as public sector economists are estimating that we could lose as much as six-tenths of a point, maybe a little bit more, of economic growth.
"And that means, inevitably, hundreds of thousands of people who are not going to get jobs that otherwise would get them," Obama said.
"It means that you have fewer customers with money in their pockets ready to buy your goods and services.
"It means that the global economy will be weaker, because although we obviously still have a long way to go in recovery, we're actually doing significantly better than some of the other developed nations," he said.
"The worst part of it is it's entirely unnecessary. It's not what we should be doing," he added.
"If you look right now at what our economy needs, taking USD 85 billion out of it over the next six months -- indiscriminately, arbitrarily, without a strategy behind it -- that's not a smart thing to do if we're serious about making sure that America grows and that our middle class is thriving and there are ladders of opportunity into the middle class," he said.
Obama said for the last several months he has been calling for a balanced approach to deficit reduction that combines some tough spending cuts, and a tax reform agenda that without raising tax rates further could in fact raise sufficient revenues that combined would yield about $1.5 trillion in deficit reduction over the next decade.
According to the US President, the good news is that after four years of difficult times, there is steady recovery in the US economy, if not as robust as one would like.
"We've seen over six million jobs created over the last 35 months. Housing is finally beginning to recover. There is reason for optimism as we move forward," he said.
"I think what everybody here is aware of, though, is that we've got a long way to go. Unemployment is still too high.
Middle-class families are still feeling enormous stresses and strains.
"What I think everybody is concerned about is the enormous uncertainty in terms of the political framework, the tax framework, the debt framework within which all of you are going to be operating over the next several years," Obama said.
Image: Barack Obama