U.S. debt hitting Americans: Sequester spending cuts don't help optimism
When it comes to the nation's debt, payback time might be here.
That demonstrates the danger of trying to attack the debt problem too aggressively while the economy is struggling to recover from the recession. The nonpartisan Congressional Budget Office said the $85 billion in automatic budget cuts this fiscal year would cut growth about a third and could cost the economy 750,000 jobs.
Overall, the budget cuts and tax increases will reduce the nation's economic output by about half this year, meaning the economy will grow at about 1.4% instead of the forecast 2.9%, the CBO said.
Stacey Scarborough, director of the Children First Early Head Start program at the Venice Family Clinic, said she's facing a 5.4% cut in funding. The program is almost completely dependent on federal money, so that would mean some of the 180 low-income children attending preschool there would have to be turned away.
"I'm not saying not to deal with the deficit," Scarborough said. "But I'm not sure you should deal with it through a vulnerable population. I don't think that's the responsible solution."
Washington is under pressure to start addressing the debt, even if there is no political consensus on the best way to do it.
"I think it's about time we begin to notice some pain," said Sung Won Sohn, an economics professor at Cal State Channel Islands. "We've had it too good for too long on borrowed money."
The $85 billion in cuts this year are reasonable, considering the nearly $3.6 trillion in projected federal spending in 2013, he said.
But Democrats and Republicans, along with many analysts, said the indiscriminate nature of the budget cuts make them a bad move right now when the economy still is struggling to grow.
The automatic mechanism, known as sequestration, was supposed to be so unpalatable that it would force Congress and the White House to come up with a better plan for selective cuts to be phased in to avoid damaging the recovery. But a political stalemate in Washington has most experts predicting the cuts will go into effect.
And Democrats and Republicans widely agree that the cuts will be painful. Defense programs would be reduced about 7.9% this year, with about 700,000 civilian employees facing one-day-a-week furloughs -- in effect a 20% pay cut.
Non-defense spending would be reduced about 4.6% overall this year, and the White House has warned that the cuts, among other things, would lead to 70,000 children losing access to Head Start preschool programs, as well as reduced numbers of border patrol agents, food inspectors and air traffic controllers.
"It won't help the economy, won't create jobs [but] will visit hardship on a whole lot of people," President Obama said last week in urging Congress to replace the automatic cuts with a mix of more targeted ones and increased revenue from eliminating some corporate tax breaks.
Even strong advocates of reducing the nation's debt say the across-the-board cuts are the wrong approach.
"The truth is, to deal with the deficit and the debt you have to make some hard choices," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. "But there's a difference between doing smart policies and dumb policies. And we are on the track of doing the dumbest policies imaginable."
By failing to address the debt problem comprehensively, Washington is causing short-term pain without maximizing long-term gain, said MacGuineas, who last year helped launch the bipartisan Campaign to Fix the Debt.
"We're so lucky we have the luxury of being able to do this on a gradual timeline," she said of reforming entitlement programs such as Medicare, which face increasing problems as the baby boomers age. "But year after year, we squander it."
