Budget 101: Sequestration and the Path Forward

October 10, 2012

One year after the debt ceiling crisis, Congress and the president again face a series of tough decisions regarding federal spending and deficit reduction. With so much at stake in this debate, we’re breaking down the details of the impending across-the-board cuts, also known as sequestration. This is the last post of Budget 101.

So far in the Budget 101 series, we’ve covered the current state of the federal budget, the impact of Bush-era tax policies, the payroll “tax holiday,” and the importance of unemployment insurance. In this post, we’ll discuss the sequester, what will happen if we go over the “fiscal cliff,” and what AAUW thinks elected officials should do.

Last year, as part of the agreement to raise the debt ceiling, Congress passed the Budget Control Act. There were two key aspects of this legislation. First, $917 billion had to be cut from the federal budget over the next decade. These automatic cuts have already begun with $21 billion removed from the fiscal year 2012 budget. The second part of the legislation created the Joint Select Committee on Deficit Reduction, the so-called super committee. Members of the committee, a small group of representatives and senators, were charged with producing a plan to cut at least $1.2 trillion from the deficit over the next decade. Congress gave itself an incentive to succeed — if the committee failed to produce a plan by November 23, 2011, or if Congress failed to pass one by December 23, 2011, $500 billion in automatic, across-the-board spending cuts (“sequestrations”) split between defense and non-defense spending would occur.

Congress failed in this mission, and sequestration now looms. The first cuts are expected in January 2013, and $109.3 billion in cuts will occur each year between 2013 and 2021. Social Security, Medicaid, civil and military employee pay, and veteran benefits will be exempted, and Medicare benefits will be limited to a 2 percent reduction.

While dramatically cutting the federal budget might sound appealing, it would come with real costs. One recent analysis found that implementing sequestration would mean, among many other things

  • Head Start would serve 96,179 fewer low-income children.
  • Five million fewer families would be served by the Maternal and Child Health Services Block Grant, which provides funding for prenatal care; well-child services; infant mortality, injury, and violence prevention; oral healthcare; school-based health programs; and eliminating racial and ethnic disparities.
  • 1,133,981 fewer students would receive grants for career and technical education.

Another point against sequestration is that it would not actually close the deficit. Although the proposed cuts would bring defense and domestic discretionary spending levels down to historic lows as a percentage of the U.S. economy, it would do little to stabilize or end the debt.

So what should Congress do to prevent the sequester and what political analysts are calling the “fiscal cliff” — the combination of sequestration’s spending cuts and the expiration of the Bush-era tax cuts, unemployment insurance extensions, and the payroll tax holiday — from wreaking havoc on  the economy in January 2013?

AAUW believes that any agreement must be balanced. We shouldn’t cut programs for the young, the old, and the vulnerable while protecting cuts to other programs. Any agreement must include additional revenues, not additional hardships.

Second, AAUW believes any agreement should create capacity, not destroy it. While some argue that Pell Grants for college students or job training for displaced workers is too expensive, think about how much human potential we would lose if we didn’t provide these opportunities. A few dollars spent today can create hundreds of dollars for our economy in the future. We shouldn’t risk our country’s capacity for greatness by cutting this funding.

Finally, AAUW strongly believes that any package must honor the commitments we’ve made to one another. Social Security, Medicare, and Medicaid are promises that we’ve made as a society — no one should starve or die because they’re too poor or too old. It’s that simple, and Congress needs to recognize that and leave these programs alone.

These are tough budgetary times, and we face difficult decisions as a country. But this argument isn’t just about numbers — it’s about who we are and who we want to be as a country. AAUW urges our elected officials to enact a sensible, balanced proposal that allows our economy to grow and lets Americans live in dignity and prosperity.

Beth Scott By:   |   October 10, 2012

1 Comment

  1. […] In this installment of our ongoing Budget 101 blog series, we’re exploring what was in the “fiscal cliff” package passed by Congress over the New Year’s holiday. Late last night, the House of Representatives passed the Senate bill to pull us back from the fiscal cliff — the combination of tax and spending changes that were set to go into effect today and could have sent the U.S. economy back into a recession. But the deal, which President Obama is expected to sign, dealt only with the tax changes and merely delayed the spending cuts known as sequestration. […]

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