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The Issue: Is the sequester a 'whoa' or a 'yikes' that's just days away?

By NICOLE DEBEVEC, United Press International   |   Feb. 24, 2013 at 4:30 AM   |   Comments

The game of chicken over the across-the-board cuts in federal spending threatens to play out until the bitter end as both parties dig in to their respective positions and are blaming the other for the impasse.

Unless something is done, $85 billion in across-the-board cuts through the rest of the year -- aka the sequester -- in domestic and defense spending go into effect on Friday.

President Obama used his bully pulpit to warn that military readiness and a myriad of domestic and education programs would be harmed "if Congress allows this meat cleaver approach to take place."

House Speaker John Boehner used a Wall Street Journal commentary to say Obama lacked "courage" for warning about the cuts but offering no viable alternative.

"Having first proposed and demanded the sequester, it would make sense that the president lead the effort to replace it," the Ohio Republican said in the commentary published in the Journal.

The sequester was part of the Budget Control Act passed by Congress in August 2011 that brought conclusion to the 2011 debt-ceiling crisis, which had threatened to send the United States into default. The Republican-led House passed the act by a vote of 269-161, with 174 Republicans and 95 Democrats voting for it, and 66 Republicans and 95 Democrats voting against it.

But just how serious will it be if the sequester takes place? Will it really be as dire as some say?

"Imposing spending cuts tied to the sequester will certainly hurt the U.S. economic recovery, since it means job losses, which in turn means that people will have less money in their pockets to boost an economic recovery," said Robert Pollin, professor of economics and director of the Political Economy Research Institute at the University of Massachusetts.

The U.S. recovery is already stalled, Pollin said, noting the Gross Domestic Product growth was zero last quarter and the jobless rate rose slightly from 7.8 percent to 7.9 percent.

"Imposing the sequester cuts will not help," he said.

Abroad, he said, the message would be mixed.

"On the one hand, the debate around the sequester suggests that the U.S. is highly concerned about the fiscal deficit," Pollin said. "However, it also suggests that our political leaders can't come up with a more nuanced approach to dealing with the deficit."

Because Washington is saying the United States' top economic concern is the deficit, not mass unemployment, Pollin said in the next year, "pursuing an austerity agenda will be harmful to a U.S. and global recovery of employment. Over time that will have a negative effect on the reputation of the United States."

The sequester was put in place, Obama said, because the cuts were so onerous and indiscriminate that it would force Congress to act to reduce the federal deficit.

Obama, discussing the sequester last week while Congress was in recess, said the cuts "are not smart, they are not fair, they will hurt our economy, they will add hundreds of thousands of Americans to the unemployment rolls. This is not an abstraction -- people will lose their jobs."

But Boehner and other Republicans are placing the blame for the sequester at Obama's feet. In a statement issued soon after Obama's comments, Boehner countered the House twice passed legislation to replace the sequester with "common sense cuts and reforms that won't threaten public safety, national security, or our economy."

Add to the mix a new plan developed by Alan Simpson, a former GOP senator from Wyoming, and Erskine Bowles, a former chief of staff to Democratic President Bill Clinton, that would reduce the deficit $2.4 trillion through spending cuts and a tax-system overhaul -- more than the $1.5 trillion White House officials have said is their goal.

Simpson and Bowles led a White House bipartisan deficit-reduction panel created in February 2010 to find ways to reduce the mounting federal debt. The panel's package of tax and spending changes fell three votes short of the required 14-vote support from its 18 members that would have sent the proposal to Congress for a vote.

Bowles said on MSNBC the new plan would reduce the deficit over a 10-year period.

"It's one-quarter from revenue, one-quarter from healthcare benefit cuts," Bowles said. "[The] rest of it comes from other mandatory cuts, discretionary cuts, and from some form of government reform and interest. We think it's really necessary. We think it's enough to stabilize the debt, below 70 percent of GDP and keep it on a downward path as a percent of the economy."

As the witching hour nears, announcements have begun about how the sequester will be met.

Defense Secretary Leon Panetta said the department's 800,000 civilian employees can expect to be furloughed one day a week for 22 weeks -- a net loss of about one month's pay.

"The sequester threat has contributed to the level of uncertainty already experienced at the end of 2012 regarding the 'fiscal cliff,'" Pollin said. "The high level of policy uncertainty makes businesses more skittish about investing, which in turn slows down the recovery further."

If the sequester comes to pass, Washington has some tough decisions to make at the end of March, when the continuing resolution to keep government operational expires.

The Pentagon would have to adjust its operations downward, Pollin said, but the more serious cuts would be in social spending because, unlike the military's winding down of operations in Iraq and Afghanistan, "we are not experiencing a winding down of major missions in the areas of education, healthcare or family support."

Roger Dow, president and chief executive officer of the U.S. Travel Association, said flight delays and even longer lines at the airport would be in store if the sequester comes to pass.

"Travel has the very real potential of becoming the face of the March 1 sequester cuts," Dow said in a statement. "These across-the-board cuts may punish travelers with flight delays, long security lines at Transportation Security Agency checkpoints and multi-hour waits to clear Customs and Border Protection."

Pollin said effects of the sequester will be felt quickly.

"The cuts will add to the already weak recovery," he said, "and that will have a compounding effect as the cuts take effect in the coming months."

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