In his first State of the Union Address of his second term Tuesday night, President Barack Obama may have thrilled those who voted for him last November, but he may have made the going tough if reactions from Congressional Republicans are any measure of which, if any, of the ideas and proposals he broached see the light of day.
Obama hardens GOP opposition to sequester alternative
Republican lawmakers, following the hour-long delivery at a joint session of Congress in the U.S. Capitol, are saying a deal to reduce the deficit and replace $85 billion in automatic spending cuts set to take effect on March 1 is even less likely after what the president said.
"The president said we do not need a bigger government, but a smarter government, and I agree. But actions speak louder than words,” House Majority Leader Eric Cantor (R-Va.) said, according to The Hill.
Republicans outright reject the president's demand that they replace the $85 billion in spending cuts with a package comprised equally of spending cuts and tax revenues.
The Congressional Budget Office released a report last week that found this year's deficit would fall below $1 billion and that the nation's deficit would drop to $430 billion by 2015. Good news for the White House. The CBO report also found, however, that deficits would rise due to higher healthcare costs, and would near $1 trillion again by 2023. Bad news for the White House because it feeds the GOP claim that the Affordable Care Act, designed to bend the health care cost curve down over time, won't do what it's supposed to do.
Hit to Ohio?
For states, the sequester represents a major ax falling on their respective economies.
In Ohio, the key battleground state last year that again fell to Team Obama as it did in 2008, an economy hit hard by the Great Recession of 2008 that has recovered faster than the national economy could take another blow to the gut if across-the-board agency spending cuts are allowed to go into effect by March 1.
The Ohio Office of Budget and Management has been monitoring issues surrounding sequestration provisions of the federal Budget Control Act since its passage in August 2011, an agency spokesman told CGE Tuesday.
"As the latest deadline approached, discussions of alternative solutions continue in Washington, each presenting its own set of potential scenarios," Dave Pagnard, Deputy Director for Communications for OBM, said.
"With so many uncertainties, it’s premature to comment on specific impacts sequestration or its alternatives might have on the state budget. We do understand that two of the largest sources of federal funding in our budget—Medicaid and transportation programs—are exempt from sequestration. While direct impacts on other state programs may be manageable, a more serious long-term challenge could come from sequestration’s effect on the overall state economy—for example cutbacks in employment at Wright-Patterson Air Force Base and reduced federal procurement from Ohio industries. This is one more reason for the state to shepherd its resources and build a strong rainy day fund," Pagnard added.
He said the precise nature and impact of sequestration cuts or alternative solutions are impossible to predict. Although he declined to put a number on it, Pagnard said the Kasich administration is expecting some impact to Ohio's recovering economy.
What Pagnard did offer up, though, was informed about the effects of a previous deadline threat. According to information posted by the Dayton Daily News, which covers an area in which Wright-Patterson Air Force Base located, estimates from the House Armed Services Committee show defense cuts in Ohio would mean 1,377 fewer active-duty service members out of 8,261, and the loss of 6,250 Defense Department civilian personnel out of 25,001 in the state, according to the nonprofit and nonpartisan Center for Security Policy in Washington, D.C.
Those cuts, according to a study estimate by the National Association of Manufacturing, could cost 27,900 jobs by 2014 in Ohio's public and private sectors. Montgomery and Greene counties, home to Wright-Patterson, would have a projected annual decline to defense contractors of $92.5 million and $70.1 million, respectively, through 2021 if the full cuts land on Ohio, the Center for Security Policy estimated. In Hamilton County, home of GE Aviation in suburban Cincinnati, the reduction could hit $306.8 million a year."
More estimates of the impact on Ohio from the sequester emerged Wednesday, when the DDN reported that furloughed Air Force civilian workers would cost Ohio’s economy $111.1 million in lost wages through September. The estimate is based on 14,278 workers furloughed for 22 days of unpaid time off, an Air Force document said.
Wright-Patterson could send home up to 13,000 civilian workers on furlough if Congress and President Barack Obama fail to avert sequestration, or automatic defense and domestic spending reductions set to begin March 1. The Air Force has said it could furlough up to 180,000 civilian employees, each of whom would have to receive a 30-day notice before leaving the job temporarily.
Wright-Patterson employed more than 29,700 military and civilian personnel in 2011 and had a $4.7 billion economic impact, according to base figures. Sequestration at Wright-Patterson would result in a 15 percent cut out of the base’s operations spending. Another $2.7 million wouldn’t be spent on infrastructure to replace street lights and to install a waterline, among other projects, documents show, the DDN reported Wednesday.
White House sequester fact sheet
The White House released its own fact sheet on sequester cuts: education, small business, food safety, research and innovation, mental health, FBI and other law enforcement, U.S. Attorneys, emergency responders, NIH research, NSF research, new drug approvals, small business assistance, economic development, international trade, food safety, IRS customer service and tax compliance, Native American programs, workplace safety, Title I education funds, special education, Head Start, Social Security applicant and beneficiary services, senior meals, nutrition assistance for women, infants and children, rental assistance, emergency unemployment compensation, homelessness programs, substance abuse services, AIDS/HIV treatment and prevention and Tribal services.
The White House said the president recognizes the need to cut the deficit, but believes it should be done in a balanced way that protects investments that the middle class relies on, it said.
"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," language in the White House fact sheet "Examples of How the Sequester Would Impact Middle Class Families, Jobs and Economic Security" noted. "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."
Gov. Kasich's State of the State address will take place next Tuesday in Lima, Ohio, where the CEO-style governor running for a second term in two years will likely revisit all his accomplishments since his rise to governor in 2010 with the help of the Tea Party movement. Kasich has boasted that he found a state in disarray and deep debt, and that he balanced a budget billions out of balance without raising taxes and has applied a razzle dazzle of management reforms he says were long overdue, that will bode the state well going forward.
With his next biennial budget now in the hands of the state legislature, which now operates with a supermajority of Republicans friendly to the governor and former Congressman, the aftershocks from sequestration would represent a major monkey wrench in what Gov. Kasich has planned, including his proposal to reduce personal income tax rates by expanding the state's sales tax to hitherto exempted services.
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