Residents of Washington D.C. and surrounding areas dubbed the over-blown winter storm that was due to hit the region this week the “Snowquester”, cheekily poking fun at the weird word being endlessly tossed around the nation’s capital. Days have passed since the March 1st deadline that saw major spending cuts, called sequestration, become a reality—what does this mean for the economy of the region, and of the country? Most say it is still too early to tell, but here are some of the areas where Americans will probably feel the heat from this political freezing-over.
Last week a series of automatic spending cuts went into effect after Congress and President Obama were unable to settle on a viable alternative. This is the dreaded Sequestration, a term usually reserved for the courts, which will see across-the-board cuts, affecting both defense and discretionary domestic spending.
First off, this was never really meant to happen. The sequestration was part of a 2011 congressional act on Budget Control that was meant to force the parties to the table in search of an answer to the looming debt crisis. Yet, here we are, almost a week after the March 1st deadline, and sequestration is officially in session.
On Wednesday March 6th, the House voted to extend the federal employee pay freeze, meaning that feds won’t be receiving their annual cost of living increase for the third time since 2010. However, in addition to those having to tighten their belts even further, many employees will actually find themselves furloughed.
A furlough refers to a temporary, unpaid, and forced leave of absence. Approximately 2 million federal employees could be subjected to taking one day off of work per week for an undefined amount of time starting in late April (the government requires employees receive a 30-day notice, so we won’t be seeing any forced leave for another couple of weeks).
The nation’s capital and its surrounding areas, such as Maryland and Northern Virginia, is home to thousands of federal workers who are really going to feel the brunt of these cuts. This means a regional economic slowdown, especially due to the high number of private-sector contractors, in areas such as defense, who depend directly on the federal government for their business (take Lockheed Martin, pictured below)
Another example is the D.C. Metro, the go-to transportation method for federal employees, which stands to lose about $12 million in revenue from decreased ridership due to forced leave and government cuts. In a White House document outlining the impacts of the March 1st cuts, teachers and schools, as well as law enforcement–two areas that the city desperately needs funding for–will see important cuts to their respective budgets. Public health funding will also be impacted, meaning fewer resources to combat the spread of infectious diseases, drug addiction treatment and natural or biological disasters.
Maryland and Virginia paint the same picture. Education, work-study programs, military readiness and public safety are all areas that will be hit, and hit hard. The Commonwealth of Virginia stands to lose approximately $14 million in funding for primary and secondary education.
In a way, it is obvious that any region with such a high density of federal and fed-related activity will be badly hurt by such a sequestration, but the consequences don’t stop at the borders of the Greater Washington Area.
Nationwide, employees in fields such as border patrol and air-traffic control are receiving their furlough notices. Fewer air traffic controllers means reduced air traffic flow, and the TSA hiring freeze, means longer wait-lines at airports. The White House document mentioned above states that the FBI would see a reduction of more than 1,000 agents. Border Patrol on its end will have to reduce activity equivalent to 5,000 border agents and almost 3,000 customs agents. More than just meaning longer lines at airports and borders, this kind of reduction presents a threat to the nation’s security.
The sequestration is here to stay, but it is still early to see from where exactly the different federal agencies will be reducing their budgets. One thing is certain however, the money has been cut and consequences will ensue. Congress knew just how much was at stake prior to March 1st, but since no deal was effectively reached in time, we will have to ride this sequestration out to see just how much of an impact it will have on the region, and the country’s, economic health on the road to recovery since 2008.