Sequestration.
No, it’s not a form of dressage, or the act of saving for a rainy day. It is a fiscal threat hanging over the nation like the sword of Damocles. We had better hope Congress is a strong enough thread to keep it from falling.
In return for allowing the federal debt ceiling to rise last summer — the alternative would have been massive dislocation — Congress approved and President Obama signed a law that reduces the deficit by $1.2 trillion over 10 years by enacting arbitrary spending cuts on all programs subject to congressional control. The first $109 billion in cuts will go into effect Jan. 1 unless Congress comes up with alternatives. This is the so-called “fiscal cliff.”
It’s hard to imagine what $109 billion in cuts means. The N.C. Justice Center says the impact would be disastrous for our state:
“These indiscriminate spending cuts will eliminate thousands of teachers; result in thousands fewer children being served in Head Start; significantly reduce the number of workers who receive job training; and cripple the state’s military business community by strangling defense contracts. Altogether, sequestration cuts are expected to shrink the state’s economy by almost $3 billion over the next decade.”
More specifically, Sen. Tom Harkin, D-Iowa, chair of the Senate Appropriations Subcommittee on Labor, Health and Human Services, and Education and Related Agencies, says North Carolina will lose nearly 450 Head Start jobs, leaving more than 2,100 fewer children served. Also, 4,000 parents will lose child care subsidies, 6,000 teachers will lose their jobs and 11,000 fewer workers will be trained for future job opportunities.
In other words, these seemingly abstract numbers have real consequences for real people, and not just those who receive governmental services. There will be big job losses in both the public and private sectors.
As usual, partisan gridlock is the problem. The Senate passed a bill extending Bush-era tax cuts for the first $250,000 earned in a year by individuals and businesses. The House insisted on extending the cuts to cover all income and to make up the difference by reducing several tax credits that are significant for the middle class.
Changes in the child tax credit and earned income tax credit alone could impact more than 500,000 North Carolina families with nearly 1.2 million children, according to Citizens for Tax Justice. Nationally, 13 million families with 26 million children would be affected.
A Congressional Budget Office report shows that ending tax cuts for the upper levels would save $1 trillion over 10 years, nearly offsetting all the spending cuts mandated last summer, while affecting only 1.9 percent of the nation’s people and only 1.4 percent of North Carolina’s.
An important point often overlooked is that the affluent still would pay lower taxes on the first $250,000 of their income than they did before the tax cuts were instituted. In other words, they will continue to get a tax cut, just not as large a reduction as before.
The Center on Budget and Policy Priorities says the “fiscal cliff” really should be considered a “fiscal slope,” as the full impact of failing to act would not be felt immediately.
The center feels it would be better if the lame-duck Congress did nothing rather than passing a long-range plan without thinking out the implications. Agreed. We’ve already had enough of that.
But will the new Congress put national welfare ahead of partisanship, something the present Congress has been unwilling to do? We must hope so. The cost of sequestration will be borne by everyone, but especially those who need the government to help them help themselves.