If Congress doesn't act by Friday, $85 billion in automatic budget cuts will limit
a host of federal programs and services, including defense, education and
Medicare.
If you are one of the 2.2 million federal government workers, you are sure to be
affected if the planned cuts go ahead. The Congressional Budget Office
expects about 800,00 "full-time equivalent" employment cuts through 2014.
This does not mean, however that they will be layoffs. The most likely route
to decrease wage costs will be forced unpaid leave, also called furlough.
An analysis by Bank of America shows that reducing the workweek of 1.8
million government employees by one day per week would save $11 billion
until September 30th and be equal to 400,000 job cuts.
The Department of Defense has already indicated that it will put 800,000
of its civilian employees on a four-day workweek starting in late April. The
furloughs require a 30-day notice, which is why they cannot be started as soon
as the sequester hits and will most likely be phased in gradually.
Government contract workers will likely see reduced demand for services in
the future.
Needless to say, a reduced amount of government workers also means that
services to citizens will be delayed or cancelled. This will affect all government
services as pay for federal government employees is subject to the sequester.
The IRS for example has already said the processing of tax forms will be delayed.
Apart from reduced manpower these are the most important areas affected by
direct cuts according to the Bipartisan Policy Center:
Disaster Reflief (including hurricane Sandy( $27 billion)
Section B Rental Assistance ($1.3 billion)
Air Transportation Security and Traffic Control ($800 million)
Primary and Secondary Education ($700 million)
Mental Healthe Services ($200 million)
In the case of disaster relief, $2.7 billion less dollars will be available to pay out
to victims. Primary and secondary education will need to save $700 million,
which it cannot spend on school equipment. Medicare payments to providers
and plans will also be reduced by 2 percent, but beneficiaries will not face
direct cuts.
Many programs are exempt from the automatic cuts those are:
Social Security
Veterans benefits
Retirement programs
Medicaid
Unemployment insurance
Food stamps
Pay of military personnel
Mandatory defense spending
Other programs that benefit individuals and families with low income
Despite the headline figure of $85 billion in reduced budgets, actual decreases
in spending will likely only total $42 billion until September 30th according to
the Congressional Budget Office.
