The Smart Money: How the sequester will affect you

Posted Wednesday, February 27, 2013 in Analysis

The Smart Money: How the sequester will affect you

by Gina Hamilton

On Friday, unless House Republicans and Senate Democrats can pull an elusive rabbit out of a hat, and there is no real evidence that they're even trying, the long-dreaded sequester will take effect.

The sequester is D.C.-speak for across-the-board cuts to domestic programs and military programs -- everything except so-called "entitlement programs" such as Medicare, Medicaid, and Social Security, and interest payments on the national debt. These cuts were supposedly so dire and so painful that just the mere threat of the cuts would force Republicans and Democrats to come together and compromise for the good of the nation.

But the good of the nation hasn't been high on anybody's list lately.  And after kicking the can down the road from December 31, when the cuts should have gone into effect, along with tax cuts that were sunsetting at the same time, Congress decided to give itself another couple of months to solve the problem. 

But here we are again at zero hour, 9 a.m., and once again, nothing has happened. Political rhetoric has happened, of course, as well as the blame game, which seem to be the only two things that Washington is any good at these days. 

The Senate is trying to pass an alternative to the sequester, but it is likely to be filibustered, and in any case, won't be able to pass the Republican House, even if it makes it out of the Senate.

The Background

The reason for the sequester was a supposed deep fear of the national debt.  In actuality, the debt itself isn't a real problem for a nation that can print its own currency, as long as the debt is actually being serviced, and so far, we've been able to do that.  Over the long term, it's important that we bring in more revenue than we spend, but during a short term crisis, such as the Great Recession, running a higher-than-normal debt is actually okay, and taking into account the rock-bottom interest rates, might well be a solid financial decision.

But never mind.  The Debt, which hadn't been a problem for the GOP since the Reagan administration first blew it up, suddenly became a GOP talking point in 2010, and so a commission was chartered to provide some solutions.  This commission, officially called the National Commission on Fiscal Responsibility and Reform, but colloquially called the Simpson-Bowles Commission, after its two co-chairs, Alan Simpson and Erskine Bowles, developed a painful but more or less fair plan (except for a peculiar plan to lower marginal tax rates when the opposite was actually needed) to slowly reduce the debt over time.  It made a few rosy assumptions that may or may not have been borne out in reality, too.

However, it went nowhere.  No one liked the plan, not Democrats nor Republicans.  But with the Republicans continuing to beat the debt drum, something had to happen, and fast.  The debt ceiling was fast approaching, and it became clear that the Republicans would not vote for lifting the debt ceiling unless it was attached to some kind of debt reform.  So in the fall of 2011, a supercommittee was formed to find a bipartisan plan to reduce the debt.  In exchange, the GOP would lift the debt ceiling.  If the supercommittee came up with a plan that would pass a majority in both houses, well and good.  But if it didn't, automatic budget cuts would attach in January of 2013, and almost every area of government would be affected.

Republicans voted for the measure.  Democrats voted for it.  Surely, the supercommittee would find consensus and the two Houses would vote for their recommendations.  Ah, but this was Washington, and an election year was just around the corner.  And no, the supercommittee failed in its task.

Which left everybody in Congress with a "sequester" that they voted for.  And despite the spin on both sides of the aisle and from the White House, they can't deny their vote, because there are voting records that can be trotted out to prove it.

The Sequester and You

If you work for BIW or the Kittery Shipyard, or you are a small merchant, contractor, or restaurant who serves one of these two large employers, you're about to take a hit.  Many civilian employees of military installations or people who work for the military industry will find themselves furloughed.  They may be laid off altogether, or they may find themselves working a day or two fewer every week.  Their income, which had been ploughed back into the community, will be absent.  If they are laid off, they'll be on unemployment, and will be getting state aid of one kind or another.  If they are furloughed a couple of days a week, they may not have enough income to pay for basic necessities. 

If you work for Acadia National Park, or run one of the tourist concessions in the area, you'll likewise be hit. 

If you are a special ed teacher or work for Head Start, or your job depends on having day care for your child to go to, look out.  About 7000 teachers are expected to be let go because of the sequester. 

Transportation matches will be slashed.  So Maine may not be able to repair its roads and bridges, based on the expected federal match.  If you are a flagger or grader, or you sell asphalt or yellow paint, or happen to be a deli where a new section of road work is planned, you may be affected.  The Downeaster may have to cut its number of runs to Boston.  Air traffic controllers may be furloughed, so expect slow airline travel, and fewer safety checks of planes and other public conveyances.

The USDA warns that it may have to lay off 7,000 meat inspectors.  It may be time to consider a vegetarian diet or plan on growing your own pig and chickens. 

The FDA warns that it may not be able to continue with a drug review deal it had painstakingly set up for new drugs or repurposed drugs, so that people with treatable illnesses may die unnecessarily because the drugs cannot be approved for their conditions.  Children may not have all the vaccines they need. 

Block grants from the federal government will be slashed, too, which means that towns, already under the gun from possible revenue sharing losses, will now have less in the kitty from federal block grants.

The Small Business Administration will lose funding.  The long-term unemployed will lose funding.  The school lunch program will lose funding.  Food stamps might be pared back.

Superfund clean ups will be cut.  Grant funds for higher education and student Pell Grants will be cut.  Programs to help mothers and fathers recover money from deadbeat parents will be cut. Federal support for fisheries, ports, airports, the National Guard ... will all be cut by a set amount. 

For a state like Maine, which is a net gainer from income taxes -- that is, we bring more money back to the state than we as a state send to Washington in federal income tax -- this amounts to a significant loss of state income.  For every dollar Maine sends to D.C., we bring back $1.41.  In order to make up for those cuts, the Legislature will have to juggle already impossible numbers to either make difficult cuts to vital programs, or increase revenue to save them. 

It's not entirely too late to hope that Congress will get its collective act together and do its job, but the signs are not good. 

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