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Leaders across the country are bracing for extreme budget cuts, known as the sequester, that began Friday, March 1. These automatic cuts are occurring due to a failure between Congress and the President to negotiate an alternate plan; as it is, in 2013 alone the sequester will result in $42.7 billion cuts in defense spending and another $42.7 billion in across-the-board cuts for domestic programs from categories ranging from education to food safety programs.
Not just a one-time cut, similar cuts worth about $100 billion per year will occur over the next ten years; economists predict that this will have adverse effects on the economy, which is still recovering from the Recession of 2007.
The history of the budget sequester begins with concern over the U.S.’s massive national debt, which as of 2012 stood at over $16 trillion dollars. In order to combat this, Congress and the President agreed to sign the Budget Control Act in 2011, which would require the government to agree on a series of revenue increases or budget cuts. If the government failed to accomplish this, then a series of automatic budget cuts were set to occur Jan. 1, the same time the Bush-era tax cuts were set to expire. The combination of automatic tax increases and budget cuts were referred to as the “fiscal cliff,” which some economists predicted would result in another mini-recession if it were allowed to occur.
The President and Congress were able to come to a deal that prevented across-the-board tax increases for all but the rich Jan. 1; however, the budget issue was never truly resolved, and the deadline was instead merely pushed back to March 1.
It was originally believed that President Obama and the Republican-majority house would be able to negotiate a better, more thought-out budget deal.
As fomer acting Secretary of Treasury Neal Wolin said, “Congress enacted this in 2011 thinking that it would cause enough pain for all members that they would eventually enact a deficit reduction plan of equal size in order to avoid the indiscriminate, salami-sliced pain that the sequester embodies.”
Indeed, both sides generally agree that these indiscriminate cuts are more painful than an alternate set of cuts that would rationally target waste, and the notion of a budget sequestration holds very little appeal among Americans both Republican and Democrat. Former Republican presidential nominee Mitt Romney even said, “I think [sequestration] is a big mistake. I thought it was a mistake on the part of the White House to propose it. I think it was a mistake for Republicans to go along with it.”
However, neogtiations failed largerly because of inability for both sides of the aisle to compromise over what role taxes would play in to the alternative plan.
DePaul economics professor Lawrence Frateschi sees the sequester as largely illogical. “These cuts are horribly insane. What’s crazy is that the Republicans are even missing out on the chance to accomplish some of their goals; they passed up on the Democrats’ offer of entitlement reform, which may have the most logic out of any cuts … In the end, I wonder if this was for political rather than economical goals.”
The effects of sequestration to the economy are expected to be devastating. They are predicted by the Bipartisan Policy Center to create an approximate loss of 1 million jobs per year. Frateschi thinks that the cuts in federal grants “may even force Illinois to default.”