Selective math obscures the fact that upcoming cuts will hurt millions of Americans, possibly for years to come
Skeptics have downplayed the likely impact of “sequestration” – the $85bn cut in federal funding that’s slated to begin Friday – noting that it equals just 2.4% of total federal spending this year and that spending will continue to grow despite the cut. But this math obscures the harm that sequestration will do, not just to Americans across the country but also to the economy as a whole.
First, let’s examine the 2.4% figure. While accurate, it’s meaningless because the cuts aren’t occurring across the entire federal budget. Some programs, notably social security, are exempt, and the cuts to Medicare are strictly limited.
Instead, the cuts are concentrated in what’s known as “discretionary” programs, because Congress funds them on an annual basis (unlike “entitlement” programs, like social security, which have permanent funding). About half of discretionary spending is for defense; the other half is for a wide range of activities including education, medical and scientific research, law enforcement, environmental protection, international aid programs, and support for low-income individuals and families.
Discretionary spending accounts for about 35% of total spending, but it will bear roughly 80% of the cuts under sequestration.
Also, sequestration will have an especially big impact on some programs because it will occur nearly halfway through the fiscal year, which began last October 1. Some agencies will have to cut their programs more deeply in the remaining months of the year to hit the required savings target.
Millions of Americans will feel the impact. To cite just a few examples, we at the Center on Budget and Policy Priorities estimate that the WIC nutrition program for low-income pregnant women, infants, and young children will have to turn away 600,000 to 775,000 children and new mothers by the end of the fiscal year. We also estimate that more than 100,000 low-income families will likely lose housing assistance that helps them afford rent.
Meanwhile, the US Department of Labor estimates that the roughly 3.8m long-term unemployed workers who receive federally funded benefits will see their weekly benefits cut by nearly 11%. That translates into an average of about $140 per month loss for a jobless worker, many of whom may have exhausted their savings.
Other cuts under sequestration could affect a broad swath of the public, slowing everything from the processing of social security applications (due to staff cuts at the Social Security Administration), to air travel (due to cuts in the number of airport security workers), to progress in developing ways to prevent and treat serious diseases (due to funding cuts for the National Institutes of Health).
The economy has struggled to regain its footing after the Great Recession, and Congress has already imposed headwinds by letting the temporary payroll tax cut of 2010 expire in January. Sequestration would be another significant hit. The Congressional Budget Office estimates that sequestration will cost about 750,000 jobs by the fourth quarter of 2013 and slow economic growth this year from 2.0% to 1.4%.
What about the claim that federal spending will keep rising despite sequestration? That, too, is accurate but meaningless, because the part of the budget that will bear the brunt of the cuts – discretionary programs – will not rise. In fact, it will face significant cuts.
If sequestration takes effect, overall discretionary funding this year will be 14% below the 2010 level (after adjusting for inflation), and 9% below the 2010 level even if the effects of inflation are ignored.
And, Friday’s scheduled sequestration is just the first installment in a scheduled nine-year, $1tn set of cuts. Moreover, this $1tn in cuts comes on top of $1.5tn in cuts to discretionary programs over the next decade instituted largely under the same legislation that established the sequester: the 2011 Budget Control Act.
If all these cuts take effect, by 2021, overall discretionary funding will be about 19% below the 2010 level, after adjusting for inflation.
These cuts are simply too big to impose without undermining public investments in critical areas like education, infrastructure, and basic research. And they would result in a highly unbalanced deficit-reduction effort.
Let’s presume that sequestration cuts take full effect for the next nine years. Then, when you tally up all of the deficit-reduction efforts that the president and Congress have enacted since 2011 (including the recent tax increases in the “fiscal cliff” bill), spending cuts will outpace revenue increases by nearly 4 to 1.
Rather than let this $1tn in cuts take effect, policymakers should replace it with a balanced package of tax and spending measures that do not increase poverty or inequality, jeopardize future productivity growth, or exert such a sharp, immediate drag on the still-struggling economy. This approach would be better for addressing our long-term fiscal problems and promoting economic growth.