Sequester Q&A: For US, A New Season Of Uncertainty
Other impacts will be more subtle, like longer waits at security checkpoints at airports and along the Mexican border or for cargo inspections at ports. Cuts inside the Defense Department will be particularly acute, in part because military pay is exempt, which will force sharper cuts on the rest of the budget, particularly training and maintenance. Civilian Pentagon workers will face furloughs of 22 days through the end of September. Basically, if you work for the government or do business with it, you'll be hardest hit.
Q: Will it harm the economy?
A: Yes. The Congressional Budget Office estimates it will cost 750,000 jobs and lower economic growth by 0.6 percent. That's because the cuts drain demand from the economy and affect companies that do business with the government.
Q: How big are the cuts? Huge numbers?A: Over a decade, the cuts total about $1 trillion, half from defense and half from domestic programs. There's an additional $200 billion or so in lower government interest payments. For this budget year, the Congressional Budget Office estimates the cuts are $42.7 billion from defense (8 percent) and $42.7 billion from domestic programs (5 percent). Because the cuts are backloaded into the last seven months of the budget year, they feel more like a 13 percent cut to the Pentagon and 9 percent cut to domestic agencies during that period. And these are real cuts from agency budgets that have been essentially frozen at last year's levels. Q: Aren't a lot of programs exempt? A: Yes. The majority of the federal budget is in fact walled off from the cuts. Social Security and veterans' programs are exempt, and cuts to Medicare are generally limited to a 2 percent, $10 billion reduction in payments to hospitals and doctors. Most programs that help the poor, like Medicaid, food stamps, subsidized school lunches, Pell Grants and supplemental security income payments are also exempt.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV