10 Devastating Sequestration Cuts That People Are Afraid Will Happen

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Photo: MSNBC

There’s a lot of uncertainty over what the sequestration may actually entail. Last year’s Budget Control Act provided specific percentages agencies have to cut in order to achieve $1.2 trillion in savings over 10 years. Here’s the cost:

There is a 9.4 per cent reduction for nonexempt defence agencies

There is also an 8.2 per cent reduction for discretionary non-defence agencies

What we don’t know is how much leeway agencies will have when it comes to implementation. This has people with money tied up in the government extremely skittish. 

Multiple industry analysts and government officials have speculated on the consequences of a full sequestration. Here’s a list of some of the most potentially devastating cuts to essential services that we could see. 

Billions of dollars in cuts in federal cancer research funding

National Institute of Health grants supply a crucial funding mechanism for University-level cancer research, and that could see a major cut as a result of sequestration.

$2.5 billion will be cut from the NIH after sequestration, restricting the agency's ability to give research grants and carry out their own studies into fatal disease and cancer.

Source: Washington Post

Federal courts could be forced to close an extra day each week.

The Justice Department won't escape sequestration and will also see a major cut in funding.

As a result, some federal district courts could be closed one day each week. They may also be forced to cut security, impose furloughs or resort to other cost cutting strategies that could increase the waiting period before a trial.

The federal courts system could see a $555 million loss next year.

Source: Washington Post

Every military contract may need to be completely renegotiated

If every program gets a 9.4 per cent cut, that means that the military will have to change the terms of contracts that are already inked.

For example, the military may want to extend the payment schedule for contracts or scale back an order. As a result, many or all contracts will have to be completely revisited.

'As procurement is cut, the unit costs of new aircraft and ships increase until cancellation looms as the only sensible option,' The Economist reports.

Source: The Economist

Small, local contractors could be forced out of business

One major aspect of sequestration is the impact it will have on small businesses that do work for the government.

Construction companies, local-level IT contractors and small equipment manufacturers could take a hit as they see contracts evaporate in the wake of sequestration.

While big companies can weather the hit, small businesses could easily go under as a result of sequestration

Tim Mak at POLITICO reports that small businesses would also be hit by the expiration of Bush tax cuts because many are organised as S-corps, where taxes are paid at individual rates:

defence small businesses are more naturally vulnerable than larger firms because of lower product diversification and a smaller voice in political advocacy.


There could be massive problems with air traffic control

According to industry groups, sequestration's cuts to the Federal Aviation Administration could lead to delays and problems in safety assurance at airports nationwide.

Budget cuts could close air traffic control towers, reduce flight capacity and cost 132,000 jobs, according to aerospace industry group Second To None.

The move could cut two billion pounds of freight capacity due to the reductions in staff and could delay or cancel flights for millions of passengers all year, a study showed.

Source: Aerospace Industries Association

The entire defence industry could be thrown into chaos

Massive rises in unemployment in a number of states

Several states have an abnormally high proportion of employees who work for the government.

As a result of sequestration, there will be firings, furloughs and hiring freezes in many agencies, depending on how each individual agency may decide to implement different cuts.

Here are the five states that may be hit the hardest as a result of their high levels of federal government employment:

  • Maryland
  • Virginia
  • Washington
  • California
  • Arizona


Massive cuts in education and Special Ed

Under sequestration education funding could see 5.5 per cent to 9.1 per cent cuts over the next 10 years.

28 per cent of these $4.1 billion cuts will go to special education, according to IDEA Money Watch, a group monitoring government funding of special education.

This will bring federal contributions back to the 2005 level and could lead to drastic cuts in some school districts to the education of the disabled. This could mean districts rescinding the free education for students with special need or an increase in local taxes to make up the shortfall.

Source: IDEA Money Watch

The U.S. could face another downgrade because of a solution

Now see which companies will feel the most pain.

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