President Barack Obama’s administration released a state-by-state report on how $85 billion in automatic spending cuts will degrade programs from defense to education to public health as White House officials say they don’t expect to avert reductions to start March 1.
“Our hope is that we’ll be able to come to a solution,” Dan Pfeiffer, a senior Obama adviser, said in a conference call with reporters yesterday. “But there seems to be nothing the Republicans are saying right now on Sunday to suggest that by Friday they’re going to change their position.”
House Speaker John Boehner’s spokesman, Michael Steel, slapped the blame back. “The White House needs to spend less time explaining to the press how bad the sequester will be and more time actually working to stop it,” the Republican says.
The threat of the federal cutbacks, which would total $1.2 trillion over nine years, hasn’t fazed financial markets so far. The Standard & Poor’s 500 Index has gained 6.3% this year as U.S. lawmakers agreed on a compromise on taxes in January, and corporate earnings have been better than estimated.
The sequestration cuts amount to $85 billion for fiscal year 2013, which ends Sept. 30, out of a federal budget of about $4 trillion and U.S. gross national product of about $16 trillion.
Chicken little
“The politicians are beginning to sound like Chicken Little claiming the sky is falling” after Washington’s repeated budget crises, says Brian Jacobsen, who helps oversee about $217 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin. “Maybe the sky is falling, but they’ve exhausted us to the point of apathy.”
Still, if the impasse drags on, the Congressional Budget Office has warned that reduced federal spending may lower the GDP and cost 750,000 jobs by the end of 2013.
To emphasize the damage of the cuts, the White House yesterday released a state-by-state list of programs from education to public health that would be reduced this year. The details were put out as the nation’s governors are meeting in Washington and Obama tries to enlist their support to put pressure on Congress to reach a deal.
“The task before us is to find smart, common-sense solutions to each of these challenges so that we can move forward,” Obama told the governors, welcoming them to dinner at the White House last night. “We know that when we work together, Democrats and Republicans, North, South, East and West, we can accomplish so much more than we can on our own.”
Obama speech
Obama is scheduled to address the governors today at 11:05 a.m., Washington time.
If Obama and congressional Republicans can’t find a compromise, there will be “serious programmatic consequences for all 50 states and the District of Columbia,” says Jason Furman, the principal deputy director on the president’s National Economic Council.
Ohio will lose about $25.1 million in funding for primary and secondary education, which may jeopardize about 350 teacher and aide jobs, according to the White House. In New Jersey, the White House estimates that 1,300 children would be eliminated from Head Start and Early Head Start services.
Cuts would be especially visible in states where federal spending is higher, including Maryland and Virginia, which have numerous federal facilities. In a Feb. 18 letter to Obama, Virginia Governor Robert McDonnell, a Republican, said the reductions could force his state into a recession.
FAA cuts
Yesterday’s warnings from administration officials follow last week’s notice from the Pentagon that it would require as many as 800,000 civilian employees to take unpaid time off to reduce spending.
The impact would be felt across the country and not just by federal workers or contractors. The Federal Aviation Administration will furlough staff at air-traffic control facilities beginning April 1, and flights may be delayed as long as 90 minutes at major airports, Transportation Secretary Ray LaHood said at a Feb. 22 White House briefing. More than 230 towers at smaller and mid-size airports may be closed, according to a list posted on the FAA website.
The automatic spending cuts “will have macroeconomic consequences, cost hundreds of thousands of jobs across the country and jobs throughout the private sector,” Furman says.
Partisan debate
Pfeiffer sought to pin responsibility for any job losses on the Republicans, who have a majority in the House of Representatives.
“Are all of these things going to go into effect on the first day? No,” he said on yesterday’s call. “But there are hundreds of thousands of Americans who are working today who will lose their jobs as a consequence of this Republican decision.”
Senator John McCain, an Arizona Republican, called on Obama to initiate talks with lawmakers.
“I won’t put all the blame on the president,” McCain said on CNN’s “State of the Union” program yesterday. “But the president leads. The president should be calling us over somewhere, Camp David, the White House, somewhere, and sitting down and trying to avert these cuts.”
Republicans have faulted the president and the Democratic- controlled Senate for not acting on an alternative to replace the cuts, while continuing to needle the White House for originally suggesting the concept of sequestration in a deal the raise the debt ceiling in 2011.
Hurting states
“Considering the House has twice passed legislation to avoid the sequester, you would think White House would be focused on getting the Senate to pass a plan that would do the same instead of creating more PR stunts,” Republican National Committee spokesman Sean Spicer says.
Over the weekend, both Republican and Democratic governors, who are meeting in Washington, said that while the federal government must reduce its budget deficit, the across-the-board spending cuts would deal an unnecessary blow to still-recovering state economies.
Mississippi Governor Phil Bryant, a Republican, said he was most concerned about how the defense cuts could affect his state, from the aerospace industry to shipyards. About 9,000 civilians who work for the Defense Department in Mississippi may be furloughed, ship purchases may be delayed, and a planned demolition at Mississippi’s Naval Air Station Meridian could be scrapped, according to the White House.
Real jobs
“These are real jobs and real families,” Bryant said in an interview. “The president needs to stop holding campaign rallies and get this thing done.”
Vermont Governor Pete Shumlin, chairman of the Democratic Governors Association, said that in his state it will force furloughs in the National Guard, create delays at the Canadian border crossings, and cut into food and home heating assistance for the poor.
“We’re finally seeing some prosperity, we’re finally seeing some job growth, people are feeling better about the future -- and this just absolutely kicks you in the knees,” he said in an interview. “If this thing isn’t resolved, the states can’t make up the difference.”
To contact the reporter on this story: Hans Nichols in Washington at hnichols2@bloomberg.net
To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net
