A 2011 deal between President Obama and Congress—the Budget Control Act of 2011– authorizes sequester. Barring a last minute agreement, if sequestration happens on March 1, it will have a significant effect on budgets across a broad range of programs. Cuts will amount to $85 billion for the fiscal year and total $1.5 trillion over the next 10 years.
For the past few weeks, the President has toured the country speaking about the possible effects of sequester, including less child care, fewer crime investigation, commercial air traffic delays, and slowdown of building for defense contractors.
Republicans accused the President of over-exaggerating the potential impact and attempting to heighten public outcry over the issue. According to some polls, the President may be winning over the American public and blame Republicans for the fiscal mess. Both sides have introduced legislative propositions.
However, the prospect of any a proposal finding its way through the full Congress in time seems dim.
Impact of sequester
With the remaining months in 2013, sequester could reduce the defense budget up to 13% and domestic agency budgets by as much as 9%. Some economist s estimates a loss of 700,000 jobs. On Sunday, the White House released a report that outlines the cuts scheduled to take effect if the Democrats and Republicans fail to reach an agreement.
At a pentagon news conference, Jessica L. Wright, the acting undersecretary of defense for personnel and readiness announced that sequestration would result in funding cuts in “every program and investment, and that almost all civilian employees will feel the pain.”
Wright said that most of the Department of Defense (DOD) 800,000 civilians will be forced to go on furlough. Employees will receive a 30-day notice–actual furloughs will start in late April.
Here is a sampling of the other cuts:
- Teacher layoffs in Ohio
- Fewer vaccinations in Georgia
- Slowdown of cleanup efforts for areas impacted by Hurricane Sandy
- Cutbacks at military bases in California and Texas
These types of spending reductions will occur in Washington, D.C. and states across the country. The New York Times reports that federal immigration detention centers in New York, Texas, Alabama, Georgia, and Arizona have released hundred of violators from custody to save money in case of budget reductions.
Exceptions to sequester
Only mandatory programs that provide a social safety will avoid the automatic budget cuts. The programs exempted from sequestration include:
- Social Security (old-age, survivors, and disability)
- Veterans’ Administration programs
- Food stamps
- Pell Grants
- Children’s Health Insurance Program (CHIP)
- Medicare Part D – low-income subsidies
- Payments to individuals for refundable tax credits
This represents only a partial list of programs that can experience budget cut. Medicare will face spending reduction up to two percent. However, special rules prevent cutting benefits to recipients. Physicians, hospitals, and private insurers will receive lower payments.