Feds eye lower payments to local, state governments
By Andrew Taylor
Washington — Who’ll be the first to feel the sting?
Jobless Americans who have been out of work for a long time and local governments that are paying off loans to fix roads and schools are in tough spots when it comes to the automatic federal budget cuts that are scheduled to kick in Friday.
About 2 million long-term unemployed people could see checks now averaging $300 a week reduced by about $30. There also could be reductions in federal payments that subsidize clean energy, school construction and state and local public works projects. Low-income Americans seeking heating assistance or housing or other aid might encounter longer waits.
Government employees could get furlough notices as early as next week, although cuts in their work hours won’t happen until April.
The timing of the “sequester” spending cuts has real consequences for Americans, but it also has a political ramifications. How quickly and fiercely the public feels the cuts could determine whether President Barack Obama and lawmakers seek to replace them with a different deficit reduction plan.
Eager to put pressure on Republican lawmakers to accept his blend of targeted cuts and tax increases Obama has been highlighting the effect of the automatic cuts in grim terms. He did it again Monday, declaring the threat of the cuts already is harming the national economy.
Republicans say he is exaggerating and point to rates of spending, even after the cuts, that would be higher than in 2008 when adjusted for inflation. All Obama has to do to avoid the damage, House Speaker John Boehner said at the Capitol, is agree to the GOP’s recommended spending cuts, with no tax increases.
By all accounts, most of the pain of the $85 billion in spending reductions to this year’s federal budget would be slow in coming. The dire consequences that Obama officials say Americans will encounter, from airport delays and weakened borders to reduced parks programs and shuttered meatpacking plants, would unfold over time as furloughs kick in and agencies begin to adjust to their spending reductions.
“These impacts will not all be felt on day one,” Obama acknowledged Monday in a meeting with governors at the White House. “But rest assured the uncertainty is already having an effect.”
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 generally are limited to a 2 percent, $10 billion reduction in payments to hospitals and doctors. Most programs that help the poor, such as Medicaid, food stamps, subsidized school lunches, Pell Grants and supplemental security income payments also are exempt.
The Pentagon will feel the brunt of half the cuts. Pay for active military is off-limits for cuts, so the rest of the defense budget must absorb the hit. The Obama administration said defense contractors already have ramped down work, contributing to a dip in economic activity in the fourth quarter of last year.
Elsewhere, the White House’s budget office said long-term unemployed Americans would lose an average of more than $400 in benefits over the year. The cuts do not affect state unemployment benefits, which jobless workers typically get soon after their loss of work. The federal reductions could begin immediately, although some analysts say the government could delay them for a short period to avoid a harmful hit on the economy.
Bill Hoagland, a former top Republican Senate budget aide and now senior vice president at the Bipartisan Policy Center, a Washington think tank, said the administration must be “betwixt and between” when it comes to addressing reductions in programs such as jobless aid.
“They want to make sure the American public knows this sequester is a bad thing, but they also don’t want to disrupt the economy too much,” he said. “It’s not that the reductions won’t take place. But they could delay the impact of that until later in the year.”
Administration officials also say the Treasury Department is prepared to begin reducing subsidies that cover interest payments by state and local governments on public works, school and renewable energy projects. That means those governments will have to find money in their budgets to make up the difference in bond interest payments, and while that might not affect projects already under way, it could delay new construction efforts.
The sequester, said Douglas Rice of the Center on Budget and Policy priorities, also would mean that families that leave subsidized housing would be less likely to be replaced with people from waiting lists, and that eventually some families could lose their apartments.
Many federal programs, such as heating aid for the poor, already have many more people seeking assistance than the program budgets can cover.
Spending for the Low Income Home Energy Assistance Program, for instance, has fluctuated greatly in recent years, with the administration proposing to cut it by 13 percent this year. In such cases, it might be impossible for people denied aid to know whether it’s because of the sequester since they might have been denied help anyway.
In some instances the cuts will be felt not by beneficiaries being thrown out of programs but by longer delays to get help. In the case of subsidized housing, for example, there already are long waits for assistance in most of the country.
In the case of the Women, Infants and Children program for low-income pregnant women and their children, the government generally has tried to make sure that every eligible woman can get food aid. States aren’t permitted to cut the food benefit, which means fewer people will be served.
The Agriculture Department said it will prioritize things so that pregnant women and nursing mothers keep their aid but post-partum women who do not breastfeed could lose their aid.
Who gets hit first also depends on how the government’s budget flows. Education aid to school districts, for instance, is delivered in the fall, so effects won’t be felt until the new school year. But some teachers already are being informed that they could lose their jobs in August or September. Most Head Start programs won’t feel cuts until the upcoming school year, too.
Some programs, such as subsidized child care for the poor, are run by states, which will have flexibility in how to allocate the cuts. Just one in six eligible low-income families benefits from a federally paid for child care slot. Cuts to the program leave states with difficult options: reduce the number of children cared for, require poor families to contribute more or cut payments to providers.
“I don’t think people are going to feel it as dramatically as the administration has been suggesting,” said Hoagland. “I’m not questioning the administration’s numbers, I’m questioning their timing.”