The Sequester Explained in Plain English

Includes video and charts

Well, it’s official:

The U.S. has entered the dreaded sequester, a very costly consequence of the federal government failing to reach a budget deal by their self-imposed deadline (March 1). This is one for the history books –  the largest, automatic across the board spending cuts in American history.

But if this latest government crisis hasn’t been keeping you up at night, you’re certainly not alone. A recent study found that the vast majority of Americans have paid little to no attention as the sequester drew near; many dismissed it as a poorly made sequel to last year’s more compelling fiscal cliff thriller (along the lines of the The Hangover Part II, if you will).

But despite the lack of popular interest, the sequester is actually a pretty big deal – and real pain will be felt. While it won’t lead to across the board tax hikes – as the fiscal cliff threatened to do – it will result in sweeping cuts to government services that millions of Americans rely on.

In the days leading up to the deadline, Obama referred to the sequester as “a meat cleaver approach” to reducing the deficit, making dire warnings about the damage it would inflict on the economy and individual states.

“Across the board spending cuts mean that hundreds of thousands of Americans won’t get services they rely on from the government,” he said.

So … what is it?

where the cuts fall_times

Source: NY Times

Let’s start with the good news:

It’s not a bird flu epidemic.

Now the bad news:

The sequester means more than $85 billion in automatic across the board spending cuts to military and domestic programs over the next seven months ($42.7 billion from each).

This is the first phase of the $1.2 trillion in total cuts set to take place by the end of 2021 (spread over the next nine years), sliced evenly and indiscriminately from a range of mostly discretionary spending programs (programs that Congress renews funding for every year). Defense programs will be cut by about 8 percent and domestic programs by about 5 percent.

In anticipation of the looming cuts, immigration officials have already started releasing detainees from detention centers to reduce costs.

Only a handful of services are exempt from the cuts, including some basic safety net programs like Social Security, retirement programs, veterans’ benefits, Medicaid, and refundable tax credits.

How much is this gonna hurt?

spending cuts_ttribuneBrace yourself – it might sting pretty bad. That’s according to congressional budget experts and a recent report from the White House, detailing the widespread impact the sequester will have across the country. Of course, there is some dispute over the extent of the damage, and a number of conservative groups – particularly those advocating for smaller government – argue that the consequences have been grossly exaggerated. While seemingly large, they say the cuts are still only a tiny percentage of the federal budget – just over 2 percent.

However, a series of independent analyses have made clear that these cuts will have significant impact throughout the country. Click on the image at right to see an interesting multimedia breakdown produced by the Texas Tribune that shows the extent of various cuts in each state, as well as the impact-per-person.

Generally speaking, the sequester is expected to stunt America’s already sluggish economic recovery by reducing our growth (in terms of GDP) and killing approximately one million jobs over the next two years, according to estimates by the Bipartisan Policy Center.

Most immediately, the cuts will impact millions of jobless Americans whose unemployment checks will be reduced by upwards of 10 percent beginning as early as mid-March.

It will also result in widespread service cuts, furloughs, and layoffs across government agencies.

These are some of the key cuts you may notice in the coming months (as reported by the NY Times):

  • Air Traffic: To meet the scheduled $600 million cut to its budget, the Federal Aviation Administration will likely furlough about 10 percent of its work force each day, including air traffic controllers. This will result in reduced air traffic throughout the country and increased delays. Travelers have already begun to experience some effects of this.
  • Early childhood education: The scheduled $424 million in cuts could mean an estimated 70,000 children losing access to Head Start programs and layoffs of roughly 14,000 teachers and other employees. Parents of about 30,000 low-income children could also lose child-care assistance.
  • Health: To meet its scheduled $350 million cut, the Centers for Disease Control and Prevention will likely perform significantly fewer preventative health screenings and STD tests and significantly decrease the availability of crucial vaccines. Facing a $120 million cut, community health centers will treat roughly 900,000 fewer patients who lack health insurance.
  • Food safety: A three-week furlough of all food safety employees could result in a shortage of meat and dairy, and lead to higher food prices and greater public health risks.
  • Environment: Several air-monitoring sites will be shut down, as will more than 100 water-quality projects around the country. In addition, roughly $100 million will be cut from the Superfund program that regulates the nation’s worst polluters.
  • Recreation: National parks will have shorter hours, staffing reductions, service cuts and a decrease in firefighters and law enforcement.
  • Criminal justice: The nearly $1 billion in combined criminal justice cuts will significantly reduce the number of federal prison employees and F.B.I. officials. Additionally, federal prosecutors will likely handle 2,600 fewer cases each year.
  • Research: The National Science Foundation will cancel or reduce nearly 1,000 grants for research in things like clean energy, cyber-security, and education.
  • Defense: The sequester will likely impose numerous furlough days on civilian employees and force major cuts to the military’s health insurance program. It would also curtail military operations, including an immediate shutdown of four naval air wings and cutbacks to satellite and missile warning systems. Additionally, the Army and Air Force both plan to significantly reduce training, allowing large numbers of units to fall below acceptable levels of combat readiness.


For more on how the sequester’s impact in California:

Why’s all this happening now?

Well, first thing to know is that the whole sequester situation is self-imposed. Yeah, you heard that right – this didn’t have to happen; the government created it all.

The whole thing derives from that perennial debate between Republicans and Democrats over spending and taxation (kind of like those old “Taste great, less filling” commercials, but much less entertaining). Both parties want to reduce America’s huge budget deficit (the big gap between what the government takes in as revenue and what it spends). But Republicans argue that this should be done by dramatically reducing government spending. Democrats, however,  insist on preserving funding for most government services by increasing revenue through moderate tax increases. A middle ground, apparently, is hard to find to find.

Back in 2011, House Republicans refused to raise the debt ceiling (the amount that the U.S. is allowed to borrow to meet its spending obligations) without significant reductions to the massive deficit.

A bipartisan committee was tasked with coming up with a plan to reduce the deficit in a way that both parties could stomach.. And to force the process along, negotiators came up with a brilliantly sadistic self-discipline strategy: they created a set of consequences so undesirable it would push them to quickly agree on a reasonable solution.

It’s kind of like pledging to burn your house down unless you get your homework done by a certain deadline. Obviously, you’d figure out a way to get your work done on time and save your home from being reduced to ashes.

Right?

Not so much with the government. For every self-imposed deadline negotiators have run up against since 2011, little has been resolved – they’ve just managed to narrowly avert economic disaster by repeatedly postponing the hard decisions.

In short, the sequester is an outcome that almost no one – Republican or Democrat – is happy about.

But what about that whole fiscal cliff thing – didn’t we already resolve this?

The fiscal cliff would have raised just about everyone’s taxes, and we narrowly averted plunging off it when Congress came up with a last minute deal on New Year’s Eve. But while that compromise prevented big tax increases, it didn’t resolve the looming threat of huge spending cuts – it just kicked the can down the road a few months. And now here we are again.

Put it in perspective: how big is $85 billion?

Over the course of a full year, $85 billion in cuts comes to roughly 5 percent of domestic programs and 8 percent of defense programs. But because it’s hitting in the middle of the fiscal year (ending in September), the cuts will be about double that rate for the next 7 months.

Is there anyway to make this right?

There is, but that would involve the Republican-controlled Congress and the White House finding some budgetary compromise, which they don’t seem inclined to do. Obama wants a 50-50 mix of spending cuts and tax increases to replace the sequester and allow more time for to negotiate a better deal. But most Republicans remain staunchly opposed to the idea of any new tax increases.

The one action that both sides do seem willing to take is a measure to continue government funding through the end of the fiscal year – if they fail to do so by the end of March, the federal government will shut down.

Oy vey!

Alright – I know I’m going a bit overboard with the Daily Show clips, but this train analogy is just too brilliant to ignore.

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