Associated Press file photo
Associated Press file photo
WASHINGTON – Here comes the sequester: big federal spending cuts and a new season of economic uncertainty for a nation still trying to shake off a recession.
The politics of sequestration have been fierce, the finger-pointing incessant. And to no one’s surprise, what was designed as a way out of one Washington standoff has produced another one – and more. A week out from the March 1 deadline, there are no meaningful efforts in Washington to avert the punishing automatic cuts set out in a law nearly two years ago.
Bellowing and blame aside, what really would happen if, as expected, President Barack Obama and congressional lawmakers allow the nation to blow past the deadline?
What’s the big overall picture?
A series of cuts to federal agencies that would lead to longer lines at the nation’s borders, less money for teachers and more hassle at airport checkpoints. Virtually every dollar approved each year by Congress would be slashed by a uniform amount, which would mean at least temporary layoffs for hundreds of thousands of public and private-sector workers. Programs like Medicare and Social Security are exempt, but there is no question the slashing of other programs would slow the nation’s fragile economic recovery.
And the big numbers?
Under a 2011 law designed to avert exactly this type of inaction, March 1 means automatic cuts of $85 billion from a $3.6 trillion budget during the seven months spanning March-September. That would include cuts of 8 percent to the Pentagon and 5 percent to domestic agency operating budgets. More than 3.8 million Americans who have been jobless for six months or longer could see their unemployment benefits reduced by as much as 9.4 percent.
Why is this happening, what’s actually going to occur and who is likely to be most affected? First, how did we get here?
The seeds of the sequester were sown by a demand by House Speaker John Boehner, R-Ohio, that the 2011 debt-limit increase be matched, dollar-for-dollar, by cuts in federal spending. After “grand bargain” talks between Boehner and Obama broke down, the White House came up with the sequester idea as a way to guarantee large enough deficit cuts to offset enough new borrowing to make sure Washington didn’t have to revisit the debt limit until after the 2012 elections. The sequester threat was designed to be so harsh that it would drive the sides to compromise on an alternative.
It didn’t work. House Republicans twice last year passed legislation to replace the cuts with larger savings drawn from programs such as food stamps and federal employee pensions. Democrats controlling the Senate didn’t offer an alternative and instead put their faith in postelection negotiations to avert the “fiscal cliff,” which resulted in Obama claiming victory on his promise to raise taxes on the rich but only a two-month respite from the sequester. Now, Republicans say they won’t give in to demands by Obama and the Democrats controlling the Senate for higher taxes as part of any solution.
How quickly will the sequester’s impact be felt? How will we notice it?
It depends. At first, the general public may not much notice the cuts. The sequester isn’t a government shutdown; it’s a government slowdown. Furloughs of federal workers – forced unpaid days off – generally won’t start for a month because of notification requirements. Many government contracts would still be funded using money previously approved even as agencies slow down the awards of new contracts. But furloughs of workers such as air traffic controllers, meat inspectors, FBI agents, the Border Patrol and park rangers will mean an inevitable deterioration of noticeable government services that could, for instance, force intermittent closures of meat-packing plants and shorter operating hours at smaller airports.
Other impacts will be more subtle, such as longer waits at security checkpoints at airports and along the Mexican border or for cargo inspections at ports. Cuts inside the Defense Department will be particularly acute, in part because military pay is exempt, which will force sharper cuts on the rest of the budget, particularly training and maintenance. Civilian Pentagon workers will face furloughs of 22 days through the end of September. Basically, if you work for the government or do business with it, you’ll be hardest hit.
Will it harm the economy?
Yes. The Congressional Budget Office estimates it will cost 750,000 jobs and lower economic growth by 0.6 percent. That’s because the cuts drain demand from the economy and affect companies that do business with the government.
How big are the cuts? Huge numbers?
Over a decade, the cuts total about $1 trillion, half from defense and half from domestic programs. There’s an additional $200 billion or so in lower government interest payments. For this budget year, the Congressional Budget Office estimates the cuts are $42.7 billion from defense (8 percent) and $42.7 billion from domestic programs (5 percent). Because the cuts are backloaded into the last seven months of the budget year, they feel more like a 13 percent cut to the Pentagon and 9 percent cut to domestic agencies during that period. And these are real cuts from agency budgets that have been essentially frozen at last year’s levels.
Aren’t a lot of programs exempt?
Yes. The majority of the federal budget is in fact walled off from the cuts. Social Security and veterans’ programs are exempt, and cuts to Medicare are generally limited to a 2 percent, $10 billion reduction in payments to hospitals and doctors. Most programs that help the poor, such as Medicaid, food stamps, subsidized school lunches, Pell Grants and supplemental security income payments are also exempt.
How much discretion do the agency heads have on what to cut, and when?
Not much. The cuts are supposed to apply equally to every “program, project and activity.” That means, for instance, that the Agriculture Department can’t take money designated for Boll Weevil research and use it to pay meat inspectors. Some lawmakers want to give agency heads greater flexibility to shift money around, but the administration says that would be of only limited help. The White House has told agencies to avoid cuts presenting “risks to life, safety or health” and to minimize harm to crucial services.
OK, say it’s now March 2, and the sequester has gone into effect. Is there any way to undo or limit it before much of its effect is felt?
Sure, but it’ll take an act of Congress and Obama’s signature. So the best chance for averting the sequester’s major consequences might be to let it take effect and see if there’s a widespread backlash from business and the public that somehow provokes lawmakers and Obama to compromise. That’s hardly guaranteed. One legislative option would be to turn to a separate effort to prevent a government shutdown March 27 and use that bill to address the sequester or to give agencies flexibility in mitigating its effects.