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Instead, the sequester’s $1.2 trillion in spending cuts over 10 years – half from defense spending, half from nondefense discretionary spending – has become part of a series of “fiscal mini-cliffs” that threaten to dog Obama’s second term, if agreement on long-term deficit reduction can’t be reached. With divided government and politics highly polarized, optimism is in short supply.
In his remarks, Obama warned of damage to the economy if the sequester were to go into effect.
“Our economy right now is headed in the right direction, and it will stay that way as long as there aren't any more self-inflicted wounds coming out of Washington,” he said.
But signs point to a still-fragile economic recovery. The unemployment rate ticked up to 7.9 percent last month, and the economy shrank by 0.1 percent in the fourth quarter of 2012, according to a preliminary report last week by the federal government’s Bureau of Economic Analysis. Analysts attributed the shrinkage to a sharp decline in defense spending and business inventories. Defense spending last quarter fell 22 percent, after rising 13 percent in the third quarter.
National security would also be put at risk if the sequester went into effect, top Pentagon officials warned on Sunday.