Despite dire warnings, sequester "calamity"-free so far
Back in February, President Obama warned that if the sequester cuts totaling around $85 billion this year went into effect, "All our economic progress could be put at risk."
A month into the sequester, however, that doesn't seem to be the case: Home prices are rising, and the private sector is still slowly adding jobs.
That doesn't mean the across-the-board spending cuts, which will amount to nearly $1.2 trillion in cuts over 10 years unless Congress diverts them, aren't having a negative impact. Stories of the sequester's effect are easily found in all corners of the country -- researchers in North Carolina have lost their jobs, Georgia's tourism sector has taken a hit, and Meals on Wheels (the program that brings meals to the elderly) has been cut in Maine.
The widespread economic constriction that some predicted has yet to take effect for various reasons. To start with, Congress reduced the level of cuts that will take place this year when they delayed the start of the sequestration. Congress also gave federal agencies some flexibility over how to implement the cuts, allowing them to mitigate the impacts. But while the impact of the sequester may be disparate and localized at this point, it will eventually take some toll on the overall economy.
"The full impacts of cuts this year won't be felt this year, but they'll be felt and will be measurable sometime in the future," Stephen Fuller, director of the Center for Regional Analysis at George Mason University, told CBSNews.com.
Fuller produced a report last year, funded by the Aerospace Industries Association, that predicted the sequester would result in 2.14 million jobs lost by the end of 2013. He released an updated report last month that took into account the fact that Congress delayed the sequester's implementation by two months and reduced this year's spending cuts. This new report predicts the sequester will result in 1.58 million jobs lost this year, or the equivalent of a one percent bump in the nation's unemployment rate. It also predicts the sequester will knock one point (or $158.2 billion) off the nation's Gross Domestic Product.
"The cutbacks are still real, they'll be identifiable," Fuller said. "But I don't think they'll be as noticeable to John Doe Citizen. They'll be spread out and more likely absorbed within the expanding economy."
Some of this year's cuts, Fuller said, won't have an impact until next year, once new government contracts are affected. Furthermore, now that agencies are actually implementing the cuts, they're taking different strategies than anticipated -- such as furloughing workers and freezing hiring rather than laying people off. These factors may make the sequester seem less disastrous than some expected.
Some smaller agencies, like the Federal Trade Commission, have been able to avoid furloughs all together.
"The FTC has made strategic decisions over the last couple of years that have positioned the agency to be able to sustain sequestration cuts," the agency said in a statement. "Specifically, the agency's effort to reshape its workforce through voluntary early outs and buyouts has had the effect of slowing hiring, and along with other agency actions, has helped the FTC to be able to absorb these reductions. As a result, the FTC anticipates that it will be able to operate without significant impact to its mission to preserve competition and protect American consumers and without the need to furlough its employees."
The Defense Department, one of the hardest hit federal departments, recently said it will only have to furlough federal employees for up to 14 days rather than 22 thanks to the leeway Congress gave the department in a recent six-month spending bill. Still, Defense Secretary Chuck Hagel said Wednesday, the sequester "is already having a disruptive and potentially damaging impact on the readiness of the force."
Government officials warned that the Department of Homeland Security -- and Customs and Border Protection (CBP) officers in particular -- would also be hard hit. By early March, Homeland Security Secretary Janet Napolitano said there were already long lines forming at airports due to cuts to CBP officer overtime. This week, however, the CBP said it was delaying furloughs and reductions in overtime hours, because of the adjustments made in Congress' six-month spending bill.
The Federal Aviation Administration has also reduced the number of airport control towers it says it will close. In February, the FAA warned that 238 would close, but in March, it said it was closing 149. FAA furloughs are set to begin on April 21.
While travelers have yet to see the "calamity" predicted by Transportation Secretary Ray LaHood, there have been some noticeable impacts. Delta Air Lines, for instance, said Tuesday that the spending cuts have slowed the company's revenue growth.
The Obama administration continues to take heat for seemingly dramatizing the impact of the sequester, but White House spokesman Jay Carney on Tuesday insisted that the effects were hard to measure because the budget cuts were a "moving picture."
"When you're dealing with these kinds of across the board forced budget cuts in the middle of a fiscal year, and you're having to make all sorts of adjustments to account for them and to reduce your expenditures accordingly, you know, it's a moving picture," he told reporters. "And that can be on the plus side where furloughs may take place a little later, or on the minus side where things may be more immediate."
He continued, "There are constant adjustments being made at each agency as they deal with their budget in terms of what the impacts of sequester are. But they are real."
As he continues to negotiate the federal budget with Congress, President Obama will return five percent of his salary as a gesture of solidarity with the federal workers facing furloughs. Others, including Defense Secretary Chuck Hagel and Sen. Mark Begich, D-Alaska, are making similar financial sacrifices.
