Over the last year our elected officials in Washington DC have been arguing about the Federal Budget. They went back and forth. Raise the debt ceiling, cut spending. Eventually they avoided a full government shutdown by passing the Budget Control Act of 2011. This law increased the debt ceiling with very harsh cuts if the "super committee" could not find 1.2 Trillion dollars in cuts.
"The BCA of 2011 was signed into law on August 2, 2011. Among other provisions, this Act provided for two major categories of federal spending reductions:
(1) discretionary spending caps that became effective in FY 2012 and
(2) automatic spending reductions that now will become effective January 2, 2013. This reduction in budget authority would result in decreased discretionary spending by DOD totaling $800 billion and by non-DOD agencies totaling $700 billion with a roughly $200 billion reduction in mandatory programs (mainly from Medicare) over this ten-year period. (AIA)
Well now people are starting to become aware that these 'discretionary' cuts could possibly come true. So what does would that mean for the rest of us. Why should we care if the Federal Government cuts 1.2 Trillion dollars in discretionary funds? I will tell you. It will destroy all the work we have done to bring our economy back from depression! It will raise our national unemployment rate and lower our GDP.
Stephen Fuller and Economist from George Mason University released these findings:
As currently formulated, the automatic spending cuts affecting DOD and non-DOD agencies’ discretionary spending authorities beginning January 2, 2013 will:
• Reduce the nation’s GDP by $215 billion;
• Decrease personal earnings of the workforce by $109.4 billion; and,
• Cost the U.S. economy 2.14 million jobs
Thats right
2.14 million jobs nation wide. Currently unemployment sits at around 8% with approximately 12 million people out of work. When you add 2.13 million to the 12 million already out of work, our unemployment rate would be near 10 % again. That is the same level we were at in October of 2009.
To fully understand the impact this would have on our workforce you must understand that the government does not employ these 2.14 million people. These are casualties of the cuts.
Image is here
As you can see the Government cuts would leas to about 746,000 jobs. That is no small number by any means. However these cuts at the Federal level would cascade through the private sector. They would effect another 430,000 people who have private contracts with the government. It would also effect another 1 million workers who also loose their jobs due to spending cuts. This would also mean a loss of over 100 billion dollars in spendable cash going into our economy every year. This could mean that the final results of the budget cuts could be even further reaching than this prediction suggests.
These job loss projections show a “dependence of state economies on federal spending,” Fuller said. “It certainly undercuts the strength of the economy and translates into a whole lot of losses for businesses that drive the economy.” (1)
Now we need the Senate to intervene.
Senator Ayotte who is the ranking member of the Armed Services Rediness Subcommittee said:
"we can come up with alternative ways to reduce spending, and it can be bipartisan". Ayotte continued, “some revenues, raising taxes on the high-income taxpayers would harm the economy, it’s important that we not play chicken with national security or our economy.”
That sounds that to me that she wants to find a solution to this problem without raising taxes or cutting DOD spending.
Senator Shaheen had this to say after reading the GMU Study:
“No one thinks sequestration is the way we should reduce the deficit, but it should press us to take action,” she said, praising the study for focusing not only on defense but also on the entire economy. "Backing off from tough choices is not the way". “The answer is a long-term solution—otherwise, we will be back in a year and again after that,” she said. “It’s not that we don’t know what to do, it’s that we need the political will.”
These are definitely tough choices and our entire economy hangs in the balance.
Originally Posted on the NH Labor News
Links used:
(1) http://www.govexec.com/...
(2) GMU research http://www.aia-aerospace.org/...
(3) Budget Control Act http://www.gpo.gov/...