The lights won’t go out on federal employees and economic output won’t stop on March 1, to be sure. But if Congress doesn’t act, some practical impacts will be felt soon thereafter – such as fewer air-traffic controllers and TSA agents at airports and fewer open hours at national parks.
Many of the cuts would take weeks to directly whack the economy. Millions of federal workers facing furlough, for example, wouldn’t stay home one day a week until April under most circumstances, because of labor laws.
Federal agencies have been planning for the sequester’s impact for at least the past several months, moreover, and could work to delay some of the hardship in hopes of a political settlement.
Some programs, including Social Security and Medicaid, are shielded from any hit, the Congressional Research Service writes. Also included, it says: “refundable tax credits to individuals; and low-income programs such as the Children’s Health Insurance Program, Supplemental Nutrition Assistance Program, Temporary Assistance for Needy Families, and Supplemental Security Income.”
The Congressional Research Service adds, “Some discretionary programs also are exempt, notably all programs administered by the Department of Veterans Affairs. Also, subject to notification of Congress by the President, military personnel accounts may either be exempt or reduced by a lower percentage.”
One possibility is that Congress could restore or reshape the reductions by the end of March, when funding authorization for the entire federal government expires and lawmakers could again go into a potentially bruising financial battle.
However, the prospect of the sequester has already had an economic impact. Defense contractors drastically cut back their spending during the fourth quarter of 2012 in anticipation of the sequester, for example – an indication that private-sector growth has already been hampered by expectations of the cuts.