The partisan divide that doomed the congressional “supercommittee” threatens to trigger automatic spending cuts that would weigh heavily on public education, housing and other programs that Americans rely on daily.
Unless members of Congress come up with a budget solution, an automatic cut known as “sequester” will kick in for the fiscal year 2013, cutting about $1.2 trillion from the budget in 10 years. The sequester would reduce annual spending by $109 billion, starting Jan. 2, 2013. The cuts are divided equally between the Defense Department and social programs.
Two sectors where Americans are likely to see a direct negative impact are public education and public housing. The sequester would cut more than $3 billion cut from the Department of Education, and mean a more than $3.5 billion decline in funding for housing and urban development programs.
Less money would trickle down to states because of cuts, affecting people who have children in public schools and those who live in public housing. Much of the drop in the housing sector is in community development block grants, according to an analysis by the Federal Funds Information for States.
“The most significant impact really tends to flow more down to the local government level,” said Marcia Howard, executive director and executive editor of FFIS. “People will notice probably that education funding is affected, as is community development.”
Medicare, community and migrant health centers, and health services for American Indians would be trimmed by 2 percent. That amounts to $123 billion in a ten-year time period for Medicare alone. Most of the cuts would come from reducing the amount of reimbursements the federal government gives to health care providers, not directly from Medicare recipients. But it would make it more challenging for the elderly to find doctors, some experts say.
The Special Supplemental Nutrition Program for Women, Infants and Children would see a $600 million reduction. At a time when poverty and hunger are at a record high, many advocates say, the cuts are likely to be detrimental to thousands of families reliant on federal aid.
The sequester would also hamper the government’s ability to implement the Affordable Care Act by reducing the amount of money that’s needed to enact some programs.
Some of the most important parts of the health care law are set to go into effect after 2014, including expanded coverage for Medicaid, mandatory employer coverage and insurance exchanges, a marketplace in which people could shop for and compare insurance plans.
Entitlement programs such as Medicaid and Social Security, however, would remain sheltered, as would funding for veterans programs, income tax credits and food stamps. Funding for these safety net programs is considered mandatory and would not be affected by the sequester.
In a time of budget crisis, the sequester threatens to hamper the ability of states to provide key services in education, housing and health care. While the impact would vary from state to state, many have expressed concern about the ongoing uncertainty resulting from the breakdown of negotiations.
“The underlying situation is that state and local governments still aren’t back up to 2002 levels. And so it’s not going to be easy for them to go in and just say, ‘We’ll just plug this $3 million hole because they may not have $3 million,” Howard said. “There will, at least to some degree, be program contractions and layoffs for employees who are funded through these federal dollars.”
In the long run, a sequester might also end up costing the government more money. If projects have to be put off until the future, it would only delay cost increases, not end them. And it might be more expensive for the government to make purchases in the future.
Republican lawmakers are already calling for a move to end what they say would be devastating cuts to the Pentagon’s budget, although few have addressed cuts to social programs. But President Obama said Monday he will veto any such move, and has blamed Republicans for the stalemate. Obama argued that both sides should come together and find a mutual solution to debt reduction.
If history is a guide, Congress will likely intervene to stop or change the automatic budget cuts. There has been no sequester since fiscal year 1991. The last time it occurred, in fiscal year 1990, cuts were subsequently reduced by legislation.