As the debt deal came to a close, most started to worry about ramifications of budget cuts on the economy. Most of the cuts will not take place until 2014. discretionary spending, which excludes Social Security, Medicare and Medicaid, would be cut $21 billion in 2012 and $42 billion in 2013, according to an analysis by the Congressional Budget Office. The spending cuts wouldthen increase to $75 billion in 2015 and $156 billion in 2021. Overall, the first phase of cuts would reduce spending by $917 billion over 10 years. A congressional committee would decide on a second phase of cuts totaling $1.5 trillion. One condition that popped out involved defense spending. If lawmakers fail to reach a deal on a second round of cuts, the Pentagon's budget would be cut automatically by about $500 billion.
Defense-related stock prices such as General Dynamics (GD), Lockheed Martin (LMT), etc, had been shedding since July, anticipating such budget cuts.
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