Whatever happened to the great 'sequester' smackdown?
Signs of any economic duress from the 'sequester' are few and far between four months in. But the $85 billion in federal spending cuts slated for this fiscal year are likely to be felt as summer deepens.
Gales Ferry, Conn.
After a busy lunch hour, waitress Missy Tirrell stops to talk about how federal spending cuts might affect Mo's, a burger joint that counts on sailors and government contractors for its business.Skip to next paragraph
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Civilian Navy contractors who work in nearby Groton, Conn., a big home port for the submarine fleet, have been talking about how they expect to start losing one day of pay a week because of furloughs, she says. And she's heard of other civilian workers checking out of a local motor inn months earlier than expected.
"We're not feeling it yet," she says. "But I'm sure we will."
Indeed, that seems to be the case across the United States: There might not be many signs of the "sequester" so far, but this summer, the effect of $85 billion in cuts this year is expected to become more visible.
The sequester was designed to be so draconian that just the threat of it would push lawmakers to the bargaining table to come up with another fiscal plan. But with legislators in no mood to negotiate budgetary matters, the sequester took effect March 1.
And not much appeared to happen.
But now, about four months later, the cuts are starting to take hold. Hundreds of thousands of government workers have either started furloughs or will by mid-July. Many organizations – especially those with government contracts – are expected to reassess their hiring plans. And federal programs such as Head Start are being curtailed.
Consumers affected by such cuts are, in turn, expected to pare their own spending – on everything from restaurant meals to the purchase of new cars.
"It looks like the third quarter is when the furloughs will really hit," says Mark Zandi, chief economist at Moody's Analytics in West Chester, Pa. "The script is still being written."
Probably the most visible sign of the sequester came when the Federal Aviation Administration furloughed air-traffic controllers at the end of April, resulting in long flight delays. But Congress quickly remedied that problem by giving the FAA more flexibility in its budget.
To see how the sequester may still have an impact, a look at California's recent furloughs of public employees may be instructive. As the state struggled to balance its budget, it resorted to the furloughs from 2009 to 2012. Furloughs have even continued for some unions this year.
Those cutbacks cost public employees annually anywhere from 5.5 to 14 percent of their paychecks, depending on the department. The average amount of wages lost for the 95,000 state workers represented by SEIU Local 1000 (Service Employees International Union) was $16,059 for the 2009-12 period, estimates Randy Cheek, a lobbyist for the union at the state capital, Sacramento.
"We had people who lost their homes, lost their cars. One member gave up the children to the parents," says Mr. Cheek, who estimates the average member makes about $30,000 per year. "Even one furlough day a month was hard on people: It caused a lot of stress."