Although the term "sequester" has been around since 1985, it became one of 2012's words of the year, and on March 1, it may go from an abstract term to a fiscal disaster for the United States. Essentially, sequestration is automatic, across the board spending cuts. In this case, the cuts would take place over the next nine years and will total $1.2 trillion, $85 billion of which would take effect immediately. They affect discretionary spending (military pay, Social Security, Medicaid, food stamps, and veterans' benefits are exempt) and are divided between defense ($500 billion) and non-defense ($700 billion) spending. Most people agrees that the cuts are draconian and will adversely affect nearly all Americans...so how did the government allow itself to be backed into this corner?
The Budget Control Act of 2011 established a bipartisan "super committee" of legislators charged with finding ways to reduce the deficit by $1.2 trillion over the next decade. As an incentive to reach an agreement, the BCA threatened sequestration should the committee failed to reach an agreement on deficit reduction. The committee did, in fact, fail to reach an agreement, which triggered the sequestration cuts to occur on January 2, 2013. Only the last-minute New Year's Eve bargain struck by Congress kept the cuts from happening, by delaying them until March 1. Now, the only way to avoid sequestration is for Congress to vote by March 1 to undo the sequestration requirement in the BCA. President Obama does not have the power to act alone. Unfortunately, John Boehner refused House Democrats' requests
to cancel this week's Congressional recess and keep working towards a solution, leaving Congress only four days to try to avoid catastrophe once they return on February 25.
So if March 1 comes and goes with no action, here's some of what Americans will notice almost immediately. TSA and air traffic layoffs will mean delays and longer airport lines for travelers. FBI layoffs could affect law enforcement efforts nationwide. 70,000 children will be kicked out of Head Start programs, and 1.2 million children will see their school lose Federal funding. The Pentagon will furlough its civilian workforce
of 800,000 people, by giving them one additional unpaid day per week. 125,000 low-income families will lose housing vouchers,and over 100,00 formerly homeless people would lose their housing. Unemployment checks would shrink by up to 9 percent. Small business loan guarantees would be slashed by almost $1 billion. The list goes on, but you see the point. These cuts will directly affect average Americans and those most in need of help.
But the effects of sequester go far beyond annoyances for travelers and financial trouble for individuals. Goldman Sachs predicts
that the cuts will lead to nearly a full percentage cut in GDP growth in the 2nd and 3rd quarters of 2013, throwing the United States back into recession. Clearly these cuts are bad for the entire country. So why on earth can't we avert the train wreck?
Republicans blame President Obama for the impending sequester, because he and the Democrats brought it up in the 2011 debt-ceiling talks. However, it's not quite that simple. Both parties wanted to use the sequester as leverage to force acceptance of their own budget cutting proposals. Neither party actually wants sequestration to take effect, but Congress has been unable to reach a compromise replacement to sequestration, meaning that gridlock may well cause catastrophic cuts that no one wanted in the first place. The House recently passed two bills related to sequestration. One shifted all of the cuts from defense to non-defense spending. The other spelled out the specifics of those additional non-defense cuts. The Congress that passed the second bill has expired, so the bill is dead. The Senate introduced a sequestration replacement bill last week, which would replace the sequestration cuts with a $110 billion combination of cuts and taxes - meaning it is unlikely to make it through the House. As it stands, Republicans refuse to budge on any tax increases, and want to move all the sequester cuts out of the defense sector and into domestic programs that largely help the disadvantaged. Democrats want a "balanced approach" that combines cuts - including entitlement reforms - with revenue. And so we wait to see where the standoff takes us in nine days. And what a shame it would be if partisan politics were to undo all of the economic progress the country has made since 2009.