In as few as 18 days, the nation and it's 50 states could be in a world of hurt just as signs point to a rising economy that while still fragile is gaining altitude, having cleared the tree line of a receding Great Recession with distant mountains of long-term debt still to surmount.
As soon as March 1, $85 billion in cuts that would take effect from March 1 through September—the first installment of $1.2 trillion in reductions over the next decade—would hit almost every agency and service in an attempt to ease the budget deficit.
For every expert who says creating jobs should be the focus going forward, mostly Republican legislators say job creation should take a back seat to deficit and debt reduction. While a policy goal now may be to minimize short term austerity since the deficit as a percent of GDP is already shrinking quickly, with a deficit expected to continue shrinking over the next few years, the looming impact for the nation and individual states would derail a steadily improving economy, forcing hurtful decisions to be made that otherwise would not be on the table if warring factions in Congress can agree to measures that avoid the inevitable disaster sequester cuts would bring.
Even before the Ides of March are upon us, a budget ax is set to fall on the federal government, indiscriminately chopping funding for the military and slicing money for various programs, including preschools and national parks, published reports say. Economists project the budget cuts would reduce the nation's total economic output by about 0.6 percentage points this year, an LA Times report shows, representing a significant hit when growth remains sluggish. "This is a significant amount of short term drag, especially combined with the increase in payroll taxes," the LAT said.
Positive data for an improving economy is clear and unequivocal. The 4-week average of initial weekly unemployment claims dropped to the lowest level in almost five years, the nation's trade deficit declined in December to $38.5 billion, house prices increased 5.5 percent year-over-year in November, sales of light vehicle were at a 15.29 million seasonally adjusted auto rates in January, that's up 10 percent from January 2012, the federal deficit for the fiscal year ending Sept. 30, 2013, is projected to fall to $845 billion, or 5.3% of gross domestic product, according to the Congressional Budget Office. CBO projects the deficit will decline to 3.7 percent of Gross Domestic Product [the sum of all goods and services] in fiscal 2014, and 2.4 percent of GDP in fiscal 2015.
Another voice on the subject, this one from Brad Plumer at the Washington Post, describes how the sequester cuts would work: "The sequester, recall, will cut $85.3 billion from the federal budget in 2013 and affect everything except Social Security, Medicaid, a few targeted anti-poverty programs, and the ongoing wars. The Pentagon budget would face an immediate 7.3 percent cut and domestic discretionary programs would be cut by more than 5 percent. The key feature of the cuts is that they would affect all agencies and programs equally ..."
A fact sheet provided by the White House on some of the cuts shows it spares few from more down days. "There is no question that we need to cut the deficit, but the President believes it should be done in a balanced way that protects investments that the middle class relies on," the White House said, adding, "Unfortunately, many Republicans in Congress refuse to ask the wealthy to pay a little more by closing tax loopholes so that we can protect investments that are helping grow our economy and keep our country safe. Our economy is poised to take off but we cannot afford a self-inflicted wound from Washington. We cannot simply cut our way to prosperity, and if Republicans continue to insist on an unreasonable cuts-only approach, the middle class risks paying the price."
Other voices say austerity is not only not needed now, but there's no reason to balance the federal budget in such a short time, when doing so puts everyone and nearly everything in jeopardy.
"But aren’t we facing a fiscal crisis?" New York Times columnist Paul Krugman asks. "No, not at all. The federal government can borrow more cheaply than at almost any point in history, and medium-term forecasts, like the 10-year projections released Tuesday by the Congressional Budget Office, are distinctly not alarming. Yes, there’s a long-term fiscal problem, but it’s not urgent that we resolve that long-term problem right now. The alleged fiscal crisis exists only in the minds of Beltway insiders."
A new report on the looming sequester reveals that the GOP anti-government propaganda of the last 30 years has really only appealed to a narrow segment of the population. A majority of the country not only believe that the Federal Government should be active in helping people find a job, it should provide jobs if the private sector is unable to do it.
Calling it bad policy, the White House said the most damaging effects of a sequester comes on the backs of the middle class "First, the US doesn't need immediate spending cuts (if anything, with a 7.9% unemployment rate, we need additional short term spending), and second, we don't need indiscriminate cuts. No one supports these specific cuts, but they might happen anyway ..."
U.S. House Speaker John Boehner, a Republican from Ohio who's in his 22nd year in Congress, wants to place all the blame on the sequester as President Obama's idea, even though the House and Senate voted for it. In a statement last week Mr. Boehner said, "Americans know the president got his higher taxes on the wealthy last month when the fiscal cliff was reached, and those tax increases were accompanied by no corresponding spending cuts. They also know spending is the problem in Washington, and the reason we have a national debt that now exceeds the size of our nation’s entire economy. Americans want government spending brought under control, and they want it done in a common-sense, responsible way."
Speaker Boehner said more tax increases on the American people won't work, but "responsible spending cuts that will help balance the federal budget within the next decade" will.
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