January Automatic Cuts Spook Congress

A meat ax approach to Washington's budget deficit problem that hacks at nearly every corner of American society — from farmers to weapons manufacturers — is spooking the Congress that embraced the idea nearly a year .

Barring any decisions to suspend or alter the plan as "sequestration" in Washington budget parlance, $109 billion in across-the-board spending cuts will kick on Jan. 2, 2013.

They are outgrowth of the 2010 elections, in conservative Republicans swept power promising to shrink the size and cost of government. Just months those elections, Congress and President Barack Obama signed on nearly $1 trillion in spending cuts 10 years, with an iron- commitment to follow up with another $1.2 trillion.

Now, as the initial installment of that second of spending cuts draws near, members of Congress facing re-election this Nov. 6 are beginning worry that voters will not be pleased when they out exactly how painful it can be to down- government, especially if the belt- stalls an already shaky economic recovery.

"We are known a lot of dumb things up here. But this sequestration concept was really the dumbest," Republican Sen. Lindsey Graham declared Tuesday.

On Jan. 2, approximately $54.5 billion new spending cuts will hit the Pentagon domestic programs will suffer an equal $54.5 billion in reductions. All the cuts would be jammed into the nine remaining months of the fiscal that ends Sept. 30, 2013, deepening the pain.

The details of how the scalpel is to applied would be determined by Obama's budget office. The Republican- House of Representatives on Wednesday passed legislation demanding those details the White House, and the Democratic-led Senate has approved a similar measure.

Ships, Children, Researchers

But analysts have a good idea of the cuts — aimed reducing annual budget deficits of more than $1 trillion — would fall, and it is a pretty picture.

According to the Bipartisan Policy Center, nearly domestic program would face the equivalent of a 12 percent spending cut next year. So, for , grants to help states provide safe drinking and low-income housing would suffer.

About 700,000 young children and pregnant or nursing would lose nutrition assistance, 25,000 teachers and school aides would be off and 100,000 kids would not enter Head Start pre- programs. The National Institutes of Health would issue about 700 fewer grants medical researchers, the Bipartisan Policy Center estimated.

Shielded the "sequestration" are veterans benefits, Social Security retirement checks, Medicare health benefits the elderly and transportation programs, which are funded a highway trust fund. Payments to doctors and others treating Medicare patients would see a 2 percent cut, .

Richard Kogan, a senior fellow the liberal Center on Budget and Policy Priorities, said that government supports farmers would suffer, as federal aid for student loans — just months after Congress, at Obama's urging, acted to keep loan rates low another year.

"In of the economy — $100 billion (worth of cuts) in a $16 trillion economy is big to notice. It could a difference by itself of a tenth or two tenths (of a percent) in real GDP growth over the of a year if it stayed in place," Kogan said. Even if it ultimately is overturned Congress, there could be lingering psychological effect, he added.


Adapted and abridged from: CNBC, July 19, 2012.