The Impact of Sequestration Locally

Because the U.S. Congress and White House were unable to reach a budget deal, President Obama had to sign off on sequestration, meaning numerous automatic spending cuts. This issue is basically a self-imposed crisis Congress created for itself when it couldn’t reach a long-term fiscal cliff deal in the last Congress. Perhaps Democrats were naive in thinking the GOP would never allow deep spending cuts to the Pentagon, but here we are, half a week after the sequestration deadline passed, and still no solution. The impact of sequestration will most likely be felt starting in the beginning of April. There will be longer lines at airports, since TSA funding will be slashed. There will be fewer flights, since there also be fewer air traffic controllers. Teachers will be laid off. States will lose federal funding for police and firefighters. And the list goes on.

The impact of sequestration is already being felt here in northeast, Pennsylvania. The Wilkes-Barre-based paper, The Citizens’ Voice, has a front page story today that Tobyhanna Army Depot, one of the largest employers in the region, is set to unveil $309 million in budget cuts, resulting in the furloughs of 5,136 civilian employees. According to the article, “Facility managers and the unions are working on the details of the furlough, in which the 5,136 employees will be required to take 22 non-consecutive furlough days between late April and Sept. 30 unless the federal budget impasse in Washington, D.C., is solved.”

What’s especially alarming is that Congress has more impending deadlines, including the debt ceiling. This week, House Speaker John Boehner said something needs to be done to ensure there is not one crisis after the other. However, I am skeptical he will get his Congress and its Tea Party wing to really pass a long-term plan that has the support of some Democrats and avoids another self-imposed crisis. This sequestration and the failure to resolve it has only increased tensions on the Hill.

Ironically, the stock market broke a record yesterday, as the Dow Jones soared to an all-time high. Since 2007, corporate profits have been skyrocketing, but job creation remains dismal and the unemployment rate remains stuck at 7.8-8 percent. Meanwhile, if this sequestration issue is not resolved, then middle and low-income workers will be hit the hardest, as evidenced by the article today in The Citizens’ Voice.

 

 

Cut, Cut, Cut

It seems unlikely now that the U.S. government is going to default, which would have led to a major spike in interest rates, possibly higher taxes, and a load of other economic woes. On Sunday, Congressional leaders and the Obama White House announced that a debt deal has been reached. It will face a vote in the House and Senate today. The deal would essentially cut $2 trillion over a decade, and it will create a bipartisan committee to determine what should be cut after the initial round of cuts occur.

The Democrats mostly lost everything they had hoped to get in a deal, especially raising revenue to stimulate the economy by restoring tax rates to what they were during the Clinton years for millionaires and billionaires only. They did, however, get to postpone debate about raising the debt ceiling again until 2013, after the president’s re-election campaign. The deal would also create cuts to defense spending, something some Dems have wanted to do for a while.

But it seems clear here that the Republicans have mostly controlled the narrative of the debate because members of the House, mostly freshman Tea Party backed folks, were utterly willing to let the U.S. default and crash the economy if they didn’t get their way. They didn’t even listen to House Speaker John Boehner when he told them to “get their asses in line” and vote for his bill a few days ago that failed. I hope that during the 2012 elections voters will remember that these Tea Party members were totally willing to crash the economy. The GOP no longer has a center or middle. The party has gone SO far to the right.

Americans should breathe a little easier knowing the U.S. is not likely to default now; however, the fact so much is going to be cut as the economy is still weak is rather alarming. Famed economist and New York Times columnist Paul Krugman has a great article about this out today. Check it out here. In it, he basically argues that deep cuts are the last thing you want to do in an economy. When the economy is weak, it’s better to create stimulus packages to put more money in people’s pockets that will cause them to spend. Stimulus also gives more money to businesses and allows them to hire. Krugman points out that the economy is still “deeply depressed” and is likely to remain that way until at least 2013. The debt deal, he argues, could also lead to higher unemployment rates and major changes or elimination to social safety net programs.

What Krugman fails to point out, though, is the possibility that things could really change after 2012. The Democrats, if they play this right, can take back the House and defeat a lot of these Tea Party members. A lot of the House seats the GOP won in 2010 were in swing districts. If the Dems regain their majorities, that would make it easier to create more jobs programs. Furthermore, the Bush era tax cuts for the wealthy are set to expire in 2013, and if the Dems succeed at letting them expire, that would create much needed revenue for the economy.

Perhaps the Democrats are living to fight another day.