Anyone listening to or following the news about the so-called “fiscal cliff” knows that Congress and the White House are in the midst of yet another battle over the budget. Part of the cliff is the Bush era tax cuts that are set to expire for all Americans by the end of the year. President Obama wants to retain them for the first $250,000 of income earned, while the Republicans favor extending the cuts for all and looking for revenues from closing tax loopholes and capping deductions.
During a speech in the White House to middle class Americans, President Obama urged citizens to contact their representatives in Congress and tweet using the hash tag #My2K to explain what the $2,000 increase in taxes the average Americans will see on January 13 would mean to them.
The other part of the cliff is this thing called “sequestration” which could result in significant job losses, federal government furloughs and end to some government contracts. Sequestration is a process of automatic across-the-board cuts under which budgetary resources are permanently canceled to enforce budget policy goals.
Given that a substantial number of African Americans and some Latino Americans work in the federal government, these groups already suffering from double digit unemployment could be made to bear the brunt of sequestration cuts. According to a 2010 study by the U.S. Office of Personnel Management, Blacks make up almost 1 in 5 non-postal federal employees, or 17.5% while Hispanics 7.7%.
So these two groups, it stands to take the heat of layoffs , furloughs, reduction in hours and elimination of cost of living allowances and raises.
Let’s rewind a bit. Recall last year around this time, Congress assembled a “super committee” of half Democrats and half Republicans and tasked them to come up with a deficit reduction plan. When they weren’t able to come up with the plan, a default, the sequestration, went into effect. Half of the cuts will be to defense spending and the other half non-defense spending.
The first set of cuts will take effect on Jan. 2, 2013 and will continue for 10 years. Over that time, spending will reduce by a total of $1.2 trillion. Further, a substantial chunk, approximately $109 billion will be reduced this coming fiscal year 2013 unless Congress passes an alternative plan.
The White House released a report last month that enumerates the programs to be cut. Below is a sampling of what is coming down the pike and part of the $984 billion dollars in programs that will be severed between January 2013 and October 2021.
Federal agencies will have to consider furloughing employees. Salaries from Architect of the Capitol, GAO, Court of Appeals for DC Circuit, Departments of Agriculture, Defense, Health and Human Services, Homeland Security, Labor, Transportation and Small Business Administration among others will be cut.
Federal Workers and Contractors could lose their jobs and contractors. One report estimates 65,000 federal workers and 96,000 contractors face being let go.
Department of Justice cuts will eliminate approximately 10 percent of existing positions, including 3,700 agents from the Federal Bureau of Investigation, the Drug Enforcement Agency, Alcohol Tobacco and Firearm agency, and US Marshals; and 975 attorneys. This loss will be added to the already existing 6,000 vacant positions. Federal assistance to state and local law enforcement has already been reduced significantly, with cuts ranging from 25 to 61 percent for critical programs.
The National Institutes of Health, which supports scientists in every state, will lose ability to award between 2,500 to 2,7000 grants to universities and medical centers. In 8 states, these cuts will be in excess $100 million. Labs can be expected to shut down, scientists laid off, and local businesses that support research centers to close.
The Department of Education cuts will total over $4 billion. In particular, Title I grants to high-poverty school districts will be cut by more than $1 billion. Such cuts will impact 4,000 schools that serve over 1.6 million disadvantaged students. About 16,000 teachers will lose their jobs. Programs for disabled students, after school programs, and college financial aid and support services will be cut. Funding will also be cut for students with disabilities, teacher quality, after school and college financial aid and support services
The Federal Aviation Administration would lose $1.1 billion in funding, which would require over 2,000 employees to be laid off, including over 1,200 air traffic controllers. FAA could be expected to close 246 air traffic control towers, and would not be able to replace more than 600 safety and aircraft certification inspectors lost through attrition.
The Federal Emergency Management Agency (FEMA) will suffer cuts that would limit its ability to respond to incidents of terrorism and other catastrophic events.
Notwithstanding, the most popular and well known low income programs are exempt from cuts under sequestration including: Child Nutrition Programs, the Children’s Health Insurance Fund , the Commodity Supplemental Food Program, Family Support Programs, Federal Pell Grants, Grants to States for Medicaid, Payments for Foster Care and Permanency , Supplemental Nutrition Assistance Program, the Supplemental Security Income Program , Temporary Assistance for Needy Families , Social security beneficiaries, Military personnel salaries at the president’s discretion upon notification to Congress, the Veterans Administration, the Unemployment Trust Fund, Compensation of the President, Payment to Military Retirement Fund and Payments to Social Security Trust Fund, among several other programs.
There are some who think falling off the cliff would be good for political reasons, while some fiscal conservatives believe it is the right thing to do, even if there will be a pinch. However, several economists say the impact could be further losses in the nation’s credit rating and another plunge into a recession.
Ideally, Congress will use these last 33 days in session to come to a “grande bargain” that is reasonable and doable.