Sequestration’s Impact: It’s Real

February 25, 2013 at 5:25 pm

Some skeptics have downplayed the impact of impending across-the-board budget cuts known as sequestration, arguing that federal spending will remain high and growing even if the cuts take effect Friday as scheduled.

In fact, sequestration will have a real impact on Americans across the country.  There is no way to cut $85 billion in a single year, mainly from discretionary programs — which include most defense spending as well as medical research, education, help for low-income families, food and water safety, law enforcement, and so on — and not see real impacts.  That’s especially true because sequestration would come on top of the large cuts in discretionary funding that are already in place under the 2011 Budget Control Act (BCA).  Taken together, the BCA cuts and sequestration would cut discretionary spending 14 percent below the 2010 level in inflation-adjusted terms, as explained below.

Here are just a few examples of what would happen under sequestration:

  • The roughly 3.8 million long-term unemployed workers receiving federally funded unemployment benefits will face nearly 11 percent cut in their weekly benefits, according to the Administration. This will translate into a cut of roughly $130 per month for jobless workers.
  • As we explain in a new paper, the WIC nutrition program for low-income pregnant women, infants, and young children will have to turn away an estimated 600,000 to 775,000 women and children, including very young children, by the end of this fiscal year.

  • We estimate that more than 100,000 low-income families will likely lose housing vouchers.

Sequestration’s impact in 2013 will be especially large in some program areas because it will happen so far into the fiscal year, which began last October 1.  Some agencies will have to cut their programs more deeply in the remaining months of the year to hit the required savings target.

Cuts could affect basic public services and investments in research that affect a broad swath of the public.  For example, cuts in the Social Security Administration would lead to staff reductions (or furloughs) that would create delays in helping people apply for benefits or resolving problems that arise with their benefits.  Cuts in the Transportation Security Agency, meanwhile, would mean staff cuts or furloughs of airport security workers, leading to longer lines at airports and slower travel.

Economy-wide, Congressional Budget Office director Douglas Elmendorf told Congress this week that sequestration would cut GDP growth this year by 0.6 percentage points (from 2.0 percent to 1.4 percent) and cost about 750,000 jobs by the fourth quarter of 2013.

Under the BCA cuts and sequestration combined, overall discretionary funding in 2013 would be 9 percent below the 2010 funding level without adjusting for inflation — and 14 percent below the 2010 level when inflation is taken into account. (see graph). (We use 2010 as the comparison because it’s the last year before policymakers began enacting significant deficit reduction.  If, however, sequestration takes effect, 2013 funding will be 6.8 percent below 2012 funding levels without taking inflation into account and somewhat more if the effects of inflation were included.)

If sequestration continues beyond 2013 as scheduled, by 2021 overall discretionary funding will be nearly 19 percent below the 2010 funding level, adjusted for inflation.

Rather than let sequestration take effect, policymakers should replace it with a balanced package of tax and spending measures that do not increase poverty or inequality or exert such a sharp, immediate drag on the recovery.

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Sharon Parrott



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6 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. Richard Cohen #
    1

    What most people need to realize is that the rich made their money from the goods and services their companies provide mostly to the middle class. As a result they are in the best position to provide for the goods and services people in the middle class and the poor need. As the poor cannot provide for themselves someone else has to do it. The middle class has been paying the most for this. It is time that the country realizes that the people who have the most need to pay more, simply because they can do so without any adverse affect to their position. They simply don’t want to. The only way to do this would be to change the way are electded officials are elected. Money must not be the factor in elections it is today. We must find a way to have all people running for political office to be funded by a common fund. Each gets the same amount of money. Then, elected offcials would have to run on their record and their decisions would not be based on who provides them money to be re-elected. And guess who that is! What do you think, people?

  2. P A Riley #
    2

    The Sequestration is just another maladaptive response to a broken and corrupted ploitical process that has been sytematically put into place over past 25 years. The Mortgage Crisis, TBTF bailouts, the Fiscal Cliff etc all are results, directly or indirectly of the US economic system being migrated from Capitalism to Cannibalism. Unfortunately our cynicism, apathy and lack of positive engagement with out political process at the local, state and federal levels has allowed a small number of well funded special interest groups a inequitable, disproportionate and damaging control of these essential systems. It will take a concerted consistent and focused effort on the part of we the Majority to end the Tyranny of the minority.

  3. Kai Lome #
    3

    You know… I think it’s really funny how the Republican’s want to do tax hikes on everyone, but themselves. Everyone wants to blame Obama for not being a good leader and marching in there and putting his foot down, but he is putting his foot down, he’s warning all of us about the things that will happen if Republican’s can’t get off their money. And to be fair, while I don’t make a lot of money (due to the fact that I am disabled) If I /was/ a billionaire, I’d be more than happy to give 89.999999% of my money to the government to make sure that we didn’t go under. But hey, I guess that’s just the way a poor person looks at things from /this/ side.

    Guess I’m just really disappointed.

  4. DHFabian #
    4

    This generation of the middle class has relied for years on paying the bills by taking from the post-middle class/poor.Every budget threat, issued under varying labels (“threat of govt shutdown,” etc.) was met by taking from the poor.This reduced the impact on the middle class enough to ensure a shrinking amount of concern about these annual budget threats. But that money is just about gone. The poor have been drained. Now the middle class is the target, and they will be drained out as well. Dirty little secret: The debt and deficits was never a priority. The purpose of budgets since the 1980s has merely been that of the upward redistribution of America’s wealth, into the bank accounts of the richest few.

    • RuthT #
      5

      I agree with most of what you post. The allegience to the very wealthy is evident in the Republican agenda of not including the closure of the tax loopholes benefitting only the wealthy into the deficit-reduction plans as the President has proposed. And their past insistence that the Bush-era tax cuts would ALL expire if they were forced to allow for them to expire on the wealthiest.

      However, we, the very poor are not totally drained yet. This sequestration should complete the job. As a disabled, single, 67-year old female whose income is SSI only, I rely on SSI for my 130% below poverty line income. And I depend upon my Housing Voucher which allows me to pay 30% of the total rent for my apartment without which I would either be homeless or in a “board and care”, and I also depend upon Meals On Wheels (that one meal a day is a huge help, allows me to eat toast for breakfast and a decent lunch) Paratransit (a personal car is unsupportable, my only means of getting anywhere is paratransit at $10 for each trip – but allows me to go to doctor, shop, etc) and IHSS which is needed as my 4 compression fractures of vertebrae and congestive heart failure does not allow for more than the most simple tasks in my home. ALL of these are expected to be lost to me, including, if the Repubs get their way, my SSI.

      BTW – most are unaware that each year the President has REDUCED the deficit and spending!

  5. Leda Rose Rodriguez #
    6

    Thank you for delineating the sequestration impact and putting it in plain sight so we have no confusion about the damage Congress is doing to those who depend on government help now–and to all taxpayers, small business owners (like myself) trying to make a comeback.

    I would love to start my own pledge to negate the Norquist No-Taxes Pledge. Those who adhere to the Norquist pledge after all these years are not facing current global and economic realities. Perhaps they have some sort of misplaced loyalty to Ronald Reagan and his era, but I would suspect that under the circumstances even Reagan himself would have broken that pledge by now because he was about getting things done and serving the best interests of the people.

    I propose a NO-GRIDLOCK Pledge by Congress. Congressmen and senators would promise to do their jobs and pass a budget, allocate funds, and keep our government operating. They would have to break legislative logjams whenever they encounter them in order to raise revenue, spend wisely, and reduce the federal deficit. Isn’t that their job?

    I believe millions of American voters would love to see Congress pass that litmus test.

    Regards to CBPP,
    Leda Rose



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