Economy to suffer as Congress fails to prevent sequester

On March 1, President Obama signed into law $85 billion dollars in federal budget cuts for the current fiscal year. The cuts, known as the sequester, are part of a provision created in the 2011 debt ceiling deal. Due to the inability of Congress to agree on how $16 trillion in cuts over the next 10 years would take shape, the sequester went into automatic effect, with half the cuts to the military and half to domestic programs.
President Obama, in a press conference on March 1, referred to the cuts as “dumb” and “arbitrary.” He blamed Republicans for the sequester, saying, “They’ve allowed these cuts to happen, because they refused to budge on closing a single wasteful loophole to help reduce the deficit.”
On “Meet the Press” on Sunday, March 3, Speaker of the House John Boehner countered this argument saying “Over the last 10 months, House Republicans have acted twice to replace the sequester… we’ve known about this for 16 months. And yet even today, there’s no plan from Senate Democrats or the White House to replace the sequester.”
For months, economists have been warning of the negative effects the sequester would bring should it go into effect. While they do not think it will trigger a second recession, there are concerns that it will slow the economy further. As Henry Aaron, senior fellow of economic studies at the Brookings Institution, said, “[The sequester is] pushing policy in exactly the wrong direction. At a time when the economy still needs a stimulus to promote recovery rather than restrictive policies to prevent overheating.”
Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities, said, “If the sequester takes affect and stays in effect for the year, I suspect it will lower real GDP growth by .5 percent points and lead to the loss of between 500,000 and 700,000 jobs. No, I don’t think it will lead to a recession, I just think it will lead to slower growth than would otherwise be.”
Texas and San Antonio are expected to be affected by the sequester due to the large military presence. As the San Antonio Express-News reported, at least 5,000 military personnel will lose their jobs, and furlough days for those at Joint Base San Antonio already being cut. KENS 5 reported that Texas’ military could lose as much as $1.7 billion dollars by October, and the 80,000 unemployed Texans could see their benefits drop in the coming months as well.
Currently, no new bills have been proposed to manage or change the effects of the sequester. The cuts are expected to affect the national parks, social security, jobs in both the military and public sector and in several other areas, according to the New York Times.