WASHINGTON – If you’re sick of what you see as out-of-control federal spending, you’re about to get your way Jan. 1 if Congress does nothing.
All of a sudden, under a series of congressionally mandated automatic cuts that virtually no one in Congress endorses, spending would be slashed by $1.2 trillion over a decade – not with a scalpel, but with a scythe.
It’s all part of the looming “fiscal cliff,” and on the spending side of the ledger, here is what it would mean:
• New York would lose $5 billion in federal funding over nine years, including $609 million in 2013 alone that state taxpayers would have to make up for in either higher taxes or fewer services.
• Most domestic spending would be cut by 8.2 percent, which would likely mean deep and quick cuts in home heating assistance and other programs for the poor, furloughs for some Border Patrol agents and other federal employees, and less federal aid for just about every other federal program.
• Health care providers would suffer a 2 percent cut in Medicare reimbursements, which, the health care industry says, would hurt services for senior citizens immediately.
• The defense budget would be slashed by 9.4 percent, threatening business at local defense contractors such as Moog Inc. and potentially putting the Niagara Falls Air Reserve Station in danger yet again.
If it all sounds like a huge whack at the U.S. economy, you’re right. Economists such as Federal Reserve Chairman Ben S. Bernanke predict that the sudden cuts would combine with the automatic tax hikes in the “fiscal cliff” to push the nation into recession.
“The fiscal cliff’s massive one-two economic punch could easily push the state’s economy backward,” said State Comptroller Thomas P. DiNapoli, who was set to release a report today saying that New Yorkers could face more than $43 billion in tax increases – which have been detailed previously in The Buffalo News – and lose $609 million in federal aid in 2013 if the nation goes over the fiscal cliff.
Buffalo would feel the pain from those budget cuts, said Andrew J. Rudnick, president of the Buffalo Niagara Partnership. “It would have a scary impact on federal spending, for sure,” he said.
Congress included those automatic budget cuts in the debt-ceiling deal it passed in the summer of 2011, but it never intended them to take effect. In essence, Congress forged a gun to aim at its own head to threaten itself into coming up with a more reasonable deficit-reduction plan by the end of 2012.
But 25 days before the end of the year, Democrats and Republicans are at loggerheads, and no reasonable deal is in sight.
“It’s reckless,” Rep. Brian Higgins, D-Buffalo, said of the fiscal cliff that Congress and the president agreed upon. “This is why people hate Congress. And their disdain is justified.”
The cuts would make New York’s always-tight budget even tighter by several hundred million dollars annually every year for a decade – this in a state that’s already projecting a budget gap of $982 million in fiscal 2014.
“It complicates the budget outlook, no doubt about it,” said Kenneth J. Pokalsky, vice president of government affairs at the Business Council of New York State.
The impact of the cuts would vary widely, but in his report, DiNapoli made clear that the impact on the state would be severe. Next year alone, education programs in the state would take a $210 million hit.
And while Medicaid is exempt from the automatic cuts, other health and human services programs in New York would suffer a $137 million blow. Housing programs would lose $128 million, and an additional $134 million would disappear from other state budget lines.
“Each of these cuts from scheduled funding levels would reduce support for programs that are essential to families and individuals across New York State,” DiNapoli’s report says.
Perhaps the program to face the most immediate threat would be the Low Income Home Energy Assistance Program. The federal government already has allocated 90 percent of the money in that program for the coming winter, but states and localities may never see the rest, said Brandon Avila, spokesman for the Campaign for Home Energy Assistance.
“We’re looking at a tough winter,” where money for the program – which aids about 100,000 families in Erie County alone – could run out before the weather gets warm, Avila said.
And that’s just the start of it. Other efforts to aid the poor, such as the Women, Infants and Children nutrition program, could be forced to cut payments, and some Border Patrol agents, park rangers and other federal employees could very well be furloughed, said Richard Kogan, senior fellow at the Center for Budget and Policy Priorities.
The same can be said for the City of Buffalo, which faces the prospect of losing more than $1 million from the Community Development Block Grant program, and the Buffalo Niagara Medical Campus, which would lose an untold amount of federal research money.
Meanwhile, the City University of New York, the State University of New York and the Commission on Independent Colleges and Universities of New York told the Inside Higher Ed website that the cuts could mean that 6,500 college students in the state might lose some of their work-study money, while 7,000 could lose federal grants they were expecting.
“Given that we’re increasingly an ‘eds and meds’ economy, you’ve got to assume these cuts are going to affect those two employment sectors a great deal,” Rudnick said.
The 2 percent cut in funding for Medicare providers might not sound like much, but it has the health care industry up in arms. That’s because many medical providers already make comparatively little money off the federal health program for senior citizens – and now, it seems, they are about to make even less.
Health care groups commissioned a study that found the cuts would claim 766,000 health care jobs over a decade while resulting in immediate service cuts – producing just the kind of impact on Medicare recipients that politicians always promise to avoid. “There is no good reason to make deep across-the-board cuts like these while doing nothing to control the growth of our entitlement programs,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
If MacGuineas sounds frustrated, so are the leaders of companies and communities that rely on military spending.
“Certainly we’re concerned and dismayed,” said Robert T. Brady, chairman of Elma-based Moog. He said it’s hard to know how the cutbacks could affect Moog because the Pentagon has refused to say whether every defense program will be whacked by 9.4 percent, or just some.
The Pentagon’s decision could have a huge impact at the Niagara Falls Air Reserve Station, which just fought off an Air Force effort to eliminate one of the two units based there.
“It could be devastating in the short term, for sure,” with layoffs likely, said John A. Cooper Sr., vice chairman of the Niagara Military Affairs Council. “I don’t know how it would affect us in the long term.”
But if Congress does what both sides want, there won’t be a long term, because there won’t be a sequestration.
“Obviously the sequestration is set to be draconian in nature,” said Rep. Tom Reed, R-Corning, “and something we all want to avoid.”