Will Sequester Cuts Trigger Another Recession?

Will Sequester Cuts Trigger Another Recession?

obama-seqThere is a very real possibility that impact of the sequester cuts along with our weak economy could result in a real recession in the United States in 2013.  The sequester cuts threaten hundreds of thousands of middle class jobs.  Our economy is continuing to strengthen but can we afford a self-inflicted wound from Washington?

For example, Michigan will lose approximately $22 million in funding for primary and secondary education, putting around 300 teacher and aide jobs at risk.  In addition, Michigan will lose approximately $20.3 million in funds for about 240 teachers, aides and staff who help children with disabilities.  Around 2,490 fewer low income students in Michigan would receive less aid to help them finance the costs of college and around 1,300 fewer students will get work-study jobs that help them pay for college.

The Office of Management and Budget now calculates that sequestration will require an annual reduction of 5% for nondefense programs and roughly 8% for defense programs.  A real concern is that small businesses create two-thirds of all new jobs in America and the automatic cuts would reduce loan guarantees to small business by up to approximately $900 million dollars.

Up to 373,000 seriously mentally ill adults and seriously emotionally disturbed children could go untreated.  The FBI and other law enforcement entities will see a reduction in capacity equivalent to more than 1,000 Federal agents.  The U.S. Customs and Border Protection would have to reduce its work hours by the equivalent of over 5,000 border patrol agents.  The sequestration cuts would affect the National Science Foundation, the Federal Drug Administration,  the Federal Aviation Administration and the Small Business Administration to name a just a few of the government agencies.  The list seems almost endless.

How did we get to this stage in time?  The Budget Control Act of 2011 enacted on August 2, 2011 brought a conclusion to the 2011 United States debt ceiling crisis.  If Congress failed to produce a deficit reduction bill with at least $1.2 trillion dollars in cuts, then Congress could enact a $1.2 trillion dollar increase in the debt ceiling but this would trigger across the board cuts or sequestrations.  Congress not only failed to pass a deficit reduction bill but it kicked the can down the road for the sequestration cuts from January 2, 2013 to March 1, 2013.

Now we find ourselves facing billions of dollars in government service reductions that no one including the President ever wanted to happen!  The problem is not only one of taxes versus spending reductions but it runs deeper than that.  It appears that no one, including President Obama, wants to make any real changes in how we conduct business as a government.  Our Federal Tax Code is badly in need of revision; our entitlement programs continue on without any plan to make them solvent any time in the near future or address their continuing financial shortfalls; and Congress would rather cut current programs than look, for example, at the 5,000 bases that weigh the military budget down each year – most of which could be closed savings billions of dollars.  Plus the fact that there is a ton of waste in the government now that could be addressed, if Congress were truly interested.

We are not creating enough jobs in our current economy to make any significant headway and the sequester cuts could only hurt an already depressed economy.

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Written by
Donald Wittmer