Sequester Could Wipe out More than a Million Jobs
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The Fiscal Times
June 8, 2012

In another dire impact assessment of the more than $1 trillion of automatic cuts in defense and domestic programs, the Bipartisan Policy Center warned on Thursday that the deep savings would greatly add to the country’s economic woes by slowing growth and wiping out more than a million jobs – without putting a dent in the federal debt.

The sequestration cuts next year alone would amount to a 15 percent reduction in almost every defense program and project – much deeper savings than previous estimates – and force layoffs by defense contractors and their suppliers.  Domestic programs could come in for similar reductions, although Medicare, Medicaid and Social Security – the main drivers of spending – would be off limits to cuts.

The net effect of these mostly arbitrary and abrupt spending cuts would be to drive down the Gross Domestic Product by roughly a half a percentage point and put more than one million Americans out of work over the next two years, according to the study. Federal workers ranging from FBI and border patrol agents to civilian Defense Department employees to government physicians and teachers would face unemployment in early January unless Congress decides to cancel or revise the sequestration.

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“At a time when the military is reorienting its mission to new strategic priorities and seeking to modernize its forces as two major land wars wind down in Iraq and Afghanistan, these across-the-board cuts will make it significantly more difficult to ensure readiness, procure new weapons systems and invest in new technology to meet emerging threats,” the report said.

“You are going to put [the government] through holy hell, but accomplish very little,” said former Sen. Pete V. Domenici, R-N.M., a member of a Bipartisan Policy center task force that is assessing the impact of the sequestration. “They wrote a bill that is an absolute fiasco.”

The sequester, mandated by last summer’s major budget and debt ceiling deal struck by the Obama administration and Congress, is a big factor in why the nation is headed for a year-end “fiscal cliff” that economists, lawmakers and public policy experts fear could  send the fragile economy back into a tail spin.

AN $8 BILLION PROBLEM
Short of intervention by the administration and Congress, a cumulative total of $8 billion of spending cuts and tax increases will kick in by the first of next year. The scheduled cuts in defense and domestic programs would come on top of the expiration of billions of dollars worth of Bush-era corporate and individual tax cuts and other tax breaks coming up for reauthorization.

Ironically,  the automatic cuts authorized last summer by President Obama and Congress could end up costing the government more in lost income tax revenue, extended unemployment insurance and other  economic recovery programs than it can hope to save.
 
Dan Glickman, a former Democratic House member and agriculture secretary who also serves on the task force, said that Congress and the administration are gambling that the sequestration doesn’t push a “shaky” economy back into the ditch. During a briefing yesterday, Glickman warned that the automatic spending cuts would act as a “reverse stimulus program” that might renew fears of another recession. “Rather than boosting the economy, it’s de-boosting the economy,” Glickman said.  “It’s playing with fire.”

The Budget Control Act, signed into law by Obama last summer to end a bitter controversy with Republicans over raising the federal debt ceiling, requires $1.2 trillion in automatic cuts equally divided between defense and domestic programs over the next decade, with the first $109 billion due to take effect on January 2. Those automatic cuts became necessary after a joint House-Senate “super committee” was unable to  reach agreement on a package of spending cuts and revenue increases to help bring down the deficit by more than a trillion dollars in the coming decade.

Washington Editor and D.C. Bureau Chief Eric Pianin is a veteran journalist who has covered the federal government, congressional budget and tax issues, and national politics. He spent over 25 years at The Washington Post.