March 15, 2013
By Anthony Rivieccio, MBA, PFA
Yes everyone, the world is coming to an end!.
By the time you read this you will learn that "Sequestration"—the mandatory Congressional budget cuts which began last Friday —are plentiful to say the least. Although the budget cut totally, only 3% of our US Budget, individually Government Agenics, like Social Security & IRS, could individually be looking at a cut as high as 10%.
Yes everyone that's right!. The Country will not come to an end-but the services our Government provides will have some devastating "short term" events.
From massive job losses, to cuts in major government services like defense as well as social programs, there's no shortage of disaster ahead, according to government officials and economic analysts from the President , on down.
Some cuts would be phased in over time, and other programs like Social Security and Medicare, are exempt from sequestration.
Most government agencies have funds available after March 1, but the clock would be ticking on how long they can keep operating. One of the biggest problems from the cuts is the number of government workers placed on furloughs or laid off.
So now that Congress and President Barack Obama can't reach a deal on a 3% budget cut, where would most people feel the immediate pain? How would it affect every day life?
Here's a look at some of the areas where sequestration could immediately impact most Americans, according to Congressional reports issued over the weekend.:
Transportation:Long lines at airports, fewer traffic controllers, higher ticket prices
The Transportation Security Administration (TSA), the agency that handles airport security, would be forced to reduce its workforce, including a seven-day furlough for screeners, which would increase passenger wait times at most of the nation's airports by more than an hour.
Also adding to the burden would be furloughs in the workforce of the Federal Aviation Administration, which means fewer air traffic controllers on the job. That means reduced air travel, longer delays for passengers. As much as 10 percent of the FAA's workforce of 40,000 would be on furlough on any given day.
It could also mean higher ticket prices for passengers as the weeks went by, as the FAA depends on a trust fund for its money and that funding comes from taxes on air traffic. So, as fewer goods and people travel, the amount in the fund goes down and it will need to be replenished.
Social Security: Claim delays, offices closed
Even though sequestration does not cut funding for Social Security, it does mean that the Social Security Administration would have to furlough workers for ten days or more. That would likely delay the processing of retirement and disability claims and a smaller staff would mean offices would be closed early or permanently, resulting in longer wait times for service. Social Security checks are still expected to be mailed.
Internal Revenue Service: Rough time for tax filers and identity theft rises
Here again, furloughs for IRS workers up to ten days or more would come into play, just as the 2012 tax filing season begins. IRS call centers are expected to close or have long hold times. There will be fewer enforcement agents available to investigate fraud claims, which could result in a greater number of identity theft cases unsolved–one of the biggest issues facing IRS agents and tax payers.
And the government would lose money, increasing the debt. Each dollar invested in enforcement actions returns $4 in additional revenue to the Treasury. Cutting investment in enforcement will lead directly to an increase in the deficit
Food safety and Inspection: Possible food shortages and industry worker layoffs
Like other government programs the Food Safety and Inspection Service would have to furlough thousands of workers. The FSIS regulates meats, poultry and egg products and inspects all food products coming into the U.S. from abroad. Plants are not allowed to operate without inspectors so the plants would be forced to close early or shut down, slowing the food supply to grocery stores and restaurants. Also, workers at the food plants as well as grocery stores and restaurants will face layoffs themselves.
National Parks: Stay home, they're likely closed
Furloughs and layoff could limit hours or close down most of the nation's national parks, just as the spring and summer days bring in most visitors.
A January memo from the National Park Service states that nearly $110 million would have to be immediately eliminated from the park services' $2.2 billion budget .Among the parks facing the most severe cuts are Yellowstone, Yosemite, the National Mall and Memorial Park in Washington, D.C., the Grand Canyon, the Everglades, the Great Smoky Mountains and Mount Rushmore.
Health: No more patients
Because federal funds support many health centers across the country, they would be cut off from some $120 million due to sequestration. That could mean up to a million patients will not get care, because there would likely be a limited or no medical staff to attend to them.
The Rest: A steady decline in government services
Other major programs facing cuts and furloughs include the Coast Guard, the Border Patrol, the Food and Drug Administration, the National Institutes of Health, elementary and secondary education, student loan programs, the Federal Bureau of Prisons, the Department of Justice, the Secret Service, the Securities and Exchange Commission, the Centers for Disease Control, the National Aeronautics and Space Administration, the National Science Foundation, the National Cybersecurity Protection System and of course all major governmental departments, including the Department of Defense which must cut up to $500 billion of its budget in the next 10 years.
The New York Hit:
About Two months’worth of job gains are about to vanish nationwide and the unemployment rate is already at an eye-popping 8.8 percent, will be hit exceptionally hard in this employment carnage as Washington begins to enact a series of controversial spending cuts known as the sequester.
Nationally, economists calculate a loss of about 300,000 jobs, roughly two months of average job gains, if the sequester is enacted untouched.
The painful cuts include local cuts in New York for jobs-search assistance programs, child care, work-study jobs and aid for nearly 8,700 low-income students, as well as Head Start education services. Analysts say the ripple effects will be felt across the broader local economy in spending cuts and lagging business confidence.
Although the entire across-the-board spending cuts (domestic and defense) will amount to $85 billion by September, a small sliver of overall government expenditure, the cumulative long-term impact will be greater.
Over 10 years, some $1.2 trillion in federal spending cuts are currently planned.
“If [the] sequester goes ahead, it will take 0.7 percent of 2013 growth in the US economy, or a 33% growth decine from last year”said Jason Johnson, Managing Assistant at The Financial Advisors Group projects.
Anthony Rivieccio is the founder & The CEO of The Financial Advisors Group, celebrating their 15th year as a fee only financial planning firm specializing in solving one's financial problems. Anthony has been a recognized financial expert since 1986. He has been seen, heard or read by many national and local media outlets including: Klipingers Personal Finance Magazine, The New York Post, News12 The Bronx, Bloomberg News Radio, Bronxnet Channel 67 TV, The Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS1010 Radio, The Bronx News newspaper and this publication.
Anthony can be reached at 347.575.5045