Bad for business

By N.B. | WASHINGTON, D.C.

THE array of automatic cuts to America's federal budget, known as the sequester, are due to take effect on Friday March 1st. Unless Congress and the White House can work out a deal—or postpone the cuts, as they did in January—around $85 billion of cuts will be made this year, and $1.1 trillion over a decade. As The Economistwrote about this week, these would affect the defence budget, but there will be plenty of trimming from other government departments too. That worries many in the travel industry. Business Travel Newsreports:

Despite positive performance in 2012 and an otherwise optimistic outlook for the year ahead, Marriott International executives are concerned that the looming US federal-spending sequestration deadline could lessen not only government travel demand, but also overall travel demand...

[Marriott CEO Arne] Sorenson estimated that government travel makes up about 5% of hotel demand overall and about 12% of demand in the Washington, DC, area. Last year, a few meetings were cancelled because of government cutbacks though nothing "that showed up in a measurable way," he said.

The austerity measures could be "another ugly chapter" for hotel chains, Mr Sorenson argues, adding to the considerable damage already caused by the bunfight over the fiscal cliff. Airlines and other hotel chains, particularly in Washington, DC, are also likely to suffer. And, says Ray LaHood, the transport secretary, the sequester could cause flight delays.

Congress has only just returned to work after a week-long break. There is little time left to avert the sequester, and the two parties remain far apart. President Obama wants a deal to include more revenue. Most Republicans, on the other hand, say the guaranteed budget cuts in the sequester, however indiscriminate, would be better than agreeing to further tax increases. So if your business relies on government spending to meet financial targets, buckle up: it's going to be a bumpy week.