What actually happened in the US in the two months since the across-the-board budget cuts took effect?
We have updated our sequestration explainer to reflect new developments. It was originally published on April 11, 2013.
When the annual White House Easter Egg Hunt faced cancellation this year due to the package of mandatory budget cuts known as sequestration, the National Park Service kicked into high gear. It rescued the event — held since 1878 — with money from “corporate sponsors and the sale of commemorative wooden eggs,” according to the Washington Post.
The nation’s airline passengers also caught a break last month when Congress passed (and President Obama quickly signed) a bill allowing the Federal Aviation Administration to shift some funds and halt the furloughs of air traffic controllers that had been blamed for long flight delays around the country.
But other programs haven’t been so lucky. Children in Indiana have been cut from the federally funded Head Start preschool program, and one Head Start program in Maine is being cut altogether. Furloughs have begun for employees of agencies from the U.S. Park Police to the Environmental Protection Agency. And cuts to Medicare have forced cancer clinics to turn away thousands of patients who are being treated with drugs the clinics can no longer afford.
We’ve taken a look at what’s actually happened in the two months since sequestration took effect.
Remind me, what is sequestration again?
Remember the clash over the debt ceiling back in 2011?
When Republicans and Obama struck a deal to raise it, they created a “super committee” of six Democrats and six Republicans and gave them three and a half months to hash out $1.2 trillion worth of cuts to the federal budget over the next decade. If they failed, a package of automatic cuts designed to slash funding to programs dear to both parties (military spending, in the Republicans’ case, and Medicare and other domestic programs in the Democrats’) would go into effect on Jan. 1, 2013.
Needless to say, the super committee failed, leading to the cuts we’re seeing now.
How does this fit in with the “fiscal cliff”?
Sequestration was one element of the so-called “fiscal cliff,” which also included a number of other spending cuts and tax increases. Congress passed a last-minute deal Jan. 1 to blunt the cliff’s impact, which included pushing back the effective date for sequestration to March 1. While Obama and members of Congress spoke out against sequestration in February — Senate Democrats announced a plan to put it off for another 10 months — those efforts failed to stop the cuts.
So what’s happened since March 1?
The indiscriminate cuts affected a wide range of federal programs and departments, making them difficult to track. (Even the White House struggled to explain exactly which programs they’d hit while it was denouncing them.) Jay Carney, the White House press secretary, told reporters Feb. 28 that sequestration would have “a rolling impact, an effect that will build and build and build.”
Congress passed a bill, signed by Obama on March 26, to spare a few programs from cuts this year, including an infant nutrition program, the nuclear weapons program and funding for security at U.S. embassies abroad — a sensitive area since the attacks in Benghazi, Libya, last September. The bill also gave some agencies, including the Pentagon, more flexibility in carrying out the sequester. And last week, Congress quickly passed (and Obama signed) a bill allowing the F.A.A. to scrap its furloughs of air traffic controllers, which had been blamed for long flight delays. But neither bill reduced the total amount the government is required to cut — $85 billion, or about 2.3 percent of the $3.6 trillion federal budget — by the end of the fiscal year in October.
Gotcha. What has all this done to the economy?
The Congressional Budget Office estimates sequestration will cost around 750,000 jobs in total, and forecasters think it could reduce economic growth by half a percentage point this year. But two months into sequestration, the effects are difficult to see. The economy added a relatively respectable 165,000 jobs in April, the Labor Department reported (though the federal government shed 8,000 jobs during the same period). And defense contractors like Lockheed Martin and Northrop Grumman, which warned that the sequester would lead to layoffs, have seen only a slight decline in their business.
Indeed, there’s at least one slice of the workforce that seems to be benefitting from sequestration: Washington lawyers. Contractors short on cash have hired attorneys to help them restructure loan payments.
Do we know any more about what’s been affected?
Yes. Sequestration is still playing out, but here’s what we know has happened so far:
While lawmakers’ salaries are exempt from cuts, sequestration hasn’t spared congressional offices, which have had to slash spending by 8.2 percent. “Magazine subscriptions have been canceled,” the Washington Post reported. “Constituents are getting e-mail instead of snail mail. Invoices are getting a second look.” Sequestration has also cut into funding for the overseas fact-finding trips lawmakers often take, known as “codels.” House Speaker John A. Boehner, a Republican, has banned his caucus from using military aircraft for codels.
The White House:
While the egg hunt was saved, the White House announced in March that it would stop giving tours due to sequestration. (Republicans criticized the decision, with Rep. James Lankford of Oklahoma calling it “a dramatic overreaction.”) The White House has also furloughed 480 Office of Management and Budget staffers, and the president will voluntarily return 5 percent of his salary. Sam Kass, the assistant White House chef, has said he is also being furloughed. But Roll Call reported that the White House — which spent “more than a month of dodging questions” about the effects of sequestration on West Wing staffers —seems to have been spared from deep cuts.
A few agencies, such as Department of Veterans Affairs, are mostly exempt from the sequester.
But the budget cuts have hit most others, sometimes with unpredictable consequences. After sequestration forced Yellowstone National Park to cut $1.75 million from its $35 million budget, the park — run by the National Park Service — trimmed its payroll and decided to cut back on snowplowing, which would delay the park’s opening. Plowing was saved only when the Cody and Jackson Hole, Wyo., chambers of commerce, fearing the economic impact of a late park opening, kicked in $170,000.
In Washington, agency after agency is planning to furlough its employees. “The Department of Housing and Urban Development,” the Washington Post reported, “will shut down for seven days starting in May, after concluding that staggering furloughs for 9,000 employees would create too much paperwork.” The Internal Revenue Service will also shut down almost entirely on furlough days. And Department of Labor employees have already started taking their furlough days, which they can do a half-day at a time.
The Department of Labor is also planning to lay off 30 of the 74 lawyers it hired to work through a backlog of mine-safety citations that are under appeal. The department had hired the lawyers after a 2010 explosion at a mine run by a company that had received many such citations but fought them, preventing regulatory action against it. The move will save the Labor Department $2.1 million.
And while air traffic controllers won’t be furloughed, it’s unclear whether the FAA will follow through on its plans to close 149 airport control towers, most of them at rural airports. New Jersey officials, for instance, remain uncertain whether the Trenton, N.J., airport tower will be closed or receive a reprieve.
Meanwhile, IRS furloughs have the potential to be counterproductive. Treasury Secretary Jacob J. Lew told a House Appropriations subcommittee in April that the cuts would lead the IRS to answer fewer calls and take longer to respond to taxpayer questions.
“It will also lead to fewer enforcement actions and reduce revenue collection,” Lew said — which could cost the government money rather than saving it.
Despite the bill Obama signed in March giving the Pentagon more flexibility in carrying out the sequester, it still must cut $41 billion from its budget this year, which Gen. Martin E. Dempsey, the chairman of the Joint Chiefs of Staff, described as “the steepest decline in our budget ever.” (The Pentagon has been asked to cut more before, but never halfway through the fiscal year.)
Hundreds of thousands of civilian Defense Department employees will likely have to take 14 furlough days by October, though it’s unclear which branches will face them. Defense Secretary Chuck Hagel has said that everything from salaries and benefits to the number of generals and admirals could be cut.
Cancer clinics in March began turning away thousands of Medicare patients being treated with expensive chemotherapy drugs, which the clinics say they can no longer afford. “Legislators meant to partially shield Medicare from the automatic budget cuts triggered by the sequester, limiting the program to a 2 percent reduction — a fraction of the cuts seen by other federal programs,” the Washington Post’s Sarah Kliff reported. “But oncologists say the cut is unexpectedly damaging for cancer patients because of the way those treatments are covered.” Medicare has said that it doesn’t have the power to restore funding for the drugs. (Rep. Renee Ellmers, a North Carolina Republican, introduced a bill that would reverse the cuts, but the legislation remains in committee.)
The federally funded Head Start early education program is expected to lose around 70,000 of its roughly 1 million slots due to sequestration. Those cuts have already hit children in Indiana, where Head Start programs in two towns resorted to a lottery system in March to determine which kids could remain. A Head Start program in Birmingham, Ala., will shut down for 10 weeks this summer, and one in Pejebscot, Maine, will close for good. Other Head Start programs — such as one in Passaic County, N.J., that expects to lose about $200,000 of its roughly $4 million in federal funding — won’t have to wrestle with cuts until the fall. A program in Colorado Springs faced with cutting 142 spots this fall had children decorate empty chairs that it has sold for $500 apiece to raise money. It has saved two spots so far.
The Head Start cuts have come even as the president called for a massive expansion of preschool.
Sequestration is also hitting schools on Indian reservations, where federal funds can make up 60 percent of a school’s budget. The Fort Peck Indian reservation in Montana “can’t hire a reading teacher in an elementary school where more than half the students do not read or write at grade level,” according to the Washington Post. Summer school may be cancelled. And the Red Lake reservation in Minnesota — where a shooting at the high school left seven people dead in 2005 — has cut its security staff, as well as course offerings and support staff, in response to sequestration.
The sequester has also hacked away at funding for scientific research. The National Science Foundation expects to make 1,000 fewer grants this year. Vanderbilt University in Nashville, Tenn., will admit fewer science and engineering graduate students. And the directors of the Department of Energy’s National Laboratories expect that the “drop in funding will force us to cancel all new programs and research initiatives, probably for at least two years.”
More than 50 Nobel laureates have signed a letter protesting the cuts, which Hunter R. Rawlings III, the president of the Association of American Universities, has also decried. “To put it kindly, this is an irrational approach to deficit reduction,” he told a Senate committee in February. “To put it not so kindly, it is just plain stupid.”
Sequestration has cut the federal judiciary’s budget by almost $350 million for the 2013 fiscal year, which is already half over. In Massachusetts, public defenders will have to take 16½ furlough days — which could lead to a backlog in the court system — and funding for drug and mental health services will be cut by 20 percent. In Dallas, the public defender’s office will shut down every Friday for the next six months. In California, the U.S. District Court of the Northern District will shutter its courtrooms in San Francisco, San Jose and Eureka on the first Friday of every month through September. And in Nebraska, U.S. District Court Judge Richard Kopf said he is “seriously considering” dismissing some criminal cases.
The sequester also has the potential to impact terrorism cases.
Public defenders representing Sulaiman Abu Ghaith, a former Al Qaeda spokesman and a son-in-law of Osama bin Laden charged with conspiring to kill Americans, have requested that a federal judge push back the trial date because of furloughs in their office. “It’s extremely troublesome to contemplate the possibility of a case of this nature being delayed because of sequestration,” Judge Lewis A. Kaplan said in Federal District Court in Manhattan. “Let me say only that — stunning.”
And the Massachusetts public defender’s office, which is representing Boston Marathon bombing suspect Dzhokhar Tsarnaev, still has to deal with furloughs. "No one knows exactly how it will affect things," a federal court official told ABC News.
Wow. Anything else?
Sequestration has led a number of states to cut their emergency unemployment benefits. Programs designed to help victims of domestic violence have had their funding slashed. And less federal funding has meant to cuts to Meals on Wheels programs in places such as Roanoke, Va, which recently started a waiting list. "We've never had a waiting list," Michele Daley, the director of nutrition services at the Local Office on Aging, which administers Meals on Wheels in four Virginia counties, told the Huffington Post. "This is the first time ever and it's a direct result of sequestration."
Has anybody beside the FAA beaten sequestration?
Yes. Weeks before the sequester hit, Agriculture Secretary Tom Vilsack started describing how his department would have to furlough meat inspectors if the cuts went through, forcing meat-processing plants to shut down on furlough days. His talk convinced the meat inspectors’ union and other industry heavyweights to start lobbying. The National Cattlemen’s Beef Association, the National Chicken Council, the National Turkey Federation went to work, and the Senate ended up moving $55 million from other Agriculture Department programs to the inspectors.
Read David A. Fahrenthold and Lisa Rein’s excellent Washington Post story for more details.
The pet industry also successfully lobbied (yes, the pet industry has a lobbying group) for the U.S. Fish and Wildlife Service to restore overtime and weekend inspections of commercial wildlife imports and exports, including exotic snakes, birds and lizards bound for American homes. But the decision may not be as silly as it sounds — the importers and exporters pay substantial fees for the inspections.
How can I keep up with the sequester?
Here are some great resources for tracking the overall impact:
Mother Jones has examples of how sequestration has played out in each of the 50 states.
The Washington Post is charting the sequester’s projected and actual impact on federal agencies.
Government Executive is tracking furloughs by department and agency.
We’ve compiled some of the best charts and graphics explaining the sequester.
The additional funds will be over and above the Rs400 crore already released under the National Horticulture Mission for the rejuvenation of orchards in the drought-affected regions of Maharashtra
The Empowered Group of Ministers (EGoM) on Drought, headed by Agriculture Minister Sharad Pawar, has approved an additional assistance of Rs256 crore for rejuvenation of orchards in drought-hit districts of Maharashtra.
After the meeting Pawar told reporters that “The proposal on providing additional assistance of Rs256 crore to protect the orchards in drought-hit districts of Maharashtra has been approved.
The additional funds will be over and above the Rs400 crore already released under the National Horticulture Mission through a special scheme launched last month for the rejuvenation of orchards in the drought-affected regions of Maharashtra.
However, the decision on extension of duty free import of oilcakes to boost fodder supply was left to the Finance Ministry, which will take a call after assessing the demand and supply situation.
When asked about this proposal, finance minister P Chidambaram said: “This has to be decided on file at the department level after assessing the domestic production and import level.”
He said that extending the duty waiver to other varieties of oil cakes like copra cake, palm kernel cake and rice bran extraction will also be decided on file and will be communicated to the EGoM Chair.
The country has imported 53,090 tonnes worth Rs84.52 crore oil cakes between September 2012 and January 2013 against 18,769 tonnes worth Rs21.27 crore in the same period last year, as per the official data.
The coal ministry has proposed to replace the 26% profit sharing between coal and lignite miners with project people with a new royalty payment system
It may be recalled the Mines and Mineral (Development and Regulator) Bill of 2011, to replace the old one was tabled in the Parliament in December 2011, when it was sent to the Standing Committee for its recommendations.
It would appear when such matters are referred to various Committees, no time frame is set within which they ought to submit their views and recommendations.
Which is why, the final recommendation has taken a good 15 months to come to public notice now.
The original provision called for 26% profit sharing by coal and lignite miners with the project affected people. Now, the Coal Ministry has proposed that this will be replaced by a system based on royalty payment by firms concerned.
In order to take care of the welfare of the affected people, a new District Mineral Foundation (DMF) has been created. The exact terms of reference of this DMF is not yet known, but the new law proposes payment of an amount equivalent to the royalty paid by companies to state government concerned. The mechanism for such payment may also have to be worked out.
Nevertheless, such moves will eventually affect the consumer who will foot the bill, as such costs will be passed on to him!
Also, at present, the rate of cess, amounting to 10% of the royalty is paid to the state government by miners. The Standing Committee has recommended that it is up to the state to increase or decrease this percentage of cess chargeable and has stated that while issuing mineral concessions, they should not put any pre-condition about location of the industries, which require the mined product. The tendency so far has been driven by the regional consideration of development and employment potential of the State.
The panel had also suggested that if shares are allotted to the affected people these should be made transferable, and issued at par value.
Provisions under this procedure of share allotment, though a novel idea, would also ensure that there is a guarantee of a regular income through dividends, and other related benefits, all of which are a welcome step in the right direction. In many organizations, offers of employment, for at least one member of the affected family, have also brought about enthusiastic response in the past.
In fact, in case of lump sum compensations, when involved, why not encourage the affected people to redeposit it with the miner in an escrow account under the Ministry of Finance or some sort government supervision, so that this fetches a regular additional income in terms of interest?
Full market reactions from Miners are likely in the next few days. But, in the meantime, coal miners would show sign of relief that the coal regulator will not determine the final rates, though he may be involved in other areas in case of disputes etc.
Time is the essence of any contract or proposal. Such matters should not be left linger on for months.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)