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MN2020 - Big Federal Cuts Coming
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Big Federal Cuts Coming

August 15, 2012 By Leah Sorensen, Undergraduate Research Fellow

Remember around this time last summer, when the U.S. was about to hit its debt ceiling? While we resolved that issue by metaphorically stuffing the problem in the closet, it didn't go away.  In fact, it's about to bust out of the closet, taking the rest of the wall with it. 

To get the deal done last year and avoid becoming the world's deadbeat, President Obama and Congress passed the Budget Control Act of 2011 (BCA). It put in place a number of measures to reduce federal deficits over the ten-year period from FY2012 to FY2021. It also enacted statutory caps on discretionary spending. In exchange, the BCA increased the debt limit by over $2 trillion.

Here's the catch, unless Congress is able to enact a plan that slashes the budget by $1.2 trillion over that time, an automatic cut of nearly $1 trillion across the board will go into effect January 2013. This will impact nearly every government department.

Just looking at Health and Human Services, Education, and the Labor Department, a report by Senator Tom Harkin (D-IA) estimates cuts to these departments would cost Minnesota $70 million in FY 2013 alone. Minnesota job losses are estimated at an ultra conservative number of about 1,600, according to the Harkin report, titled “Under Threat: Sequestration’s Impact on Nondefense Jobs and Services." The job numbers are low because, the report only calculated direct employment losses and only in areas it had rock solid numbers to make the most accurate estimations. 

Sequestration has been primarily discussed as a threat to defense spending. As the Harkin report shows, it also threatens to impact essential community services that enhance everyday, middle class Minnesota families' lives.

In fact, sequestration’s nondefense effects could be larger than its defense effects. A 2011 University of Massachusetts, Amherst study showing that a $1 billion investment in healthcare or education creates significantly more U.S. jobs than a $1 billion investment in the military.

Here is a sampling of what Minnesota would lose:

Maternal and Child Health Block grant
$697,261 sequester cut in Minnesota
14,239 fewer women, children, and families served in Minnesota

HIV Prevention and Testing (provided by CDC grants)
$198,658 sequester cut in Minnesota
4,966 fewer people tested for HIV in Minnesota

Head Start
$6,556,123 sequester cut in Minnesota
1055 fewer children served in Minnesota
220 Head Start jobs lost in Minnesota

Community Services Block Grant (CSBG)
$632,841 sequester cut in Minnesota
55,984 fewer low-income individuals served in Minnesota

Title I Grants to Local Educational Agencies (LEAs)
$12,932,780 sequester cut in Minnesota
70 fewer schools receiving grant funds in Minnesota
13,698 fewer students served in Minnesota
178 education jobs lost in Minnesota

Special Education Grants to States
$14,545,082 sequester cut in Minnesota
176 fewer jobs supported by funding in Minnesota

Federal Work Study
$1,063,743 sequester cut in Minnesota
786 fewer students receiving aid in Minnesota

Employment Service
$934,318 sequester cut in Minnesota
20,795 fewer job seekers served in Minnesota

Many federal programs and services are already dramatically underfunded, and as a result, under serving Minnesotans. These cuts come on top of Minnesota's state cuts to health and human services, education, and revenue sharing with local communities.

Even if lawmakers save some of these programs at the state and federal levels, it will shift cuts and costs to other parts of the budgets. We can ease the pain, however, if Minnesota and the federal government return to a policy of fiscal fairness. The rich need to pay a proportion of their income in taxes  more in line with middle class families, especially at the state level.

It's going to be a tough fight ahead. In addition to federal sequestration, federal tax cuts will be expiring around the same time. It's likely conservatives will hold up middle-class relief to ensure the nation's wealthiest get their breaks too. Such an outcome will only put more pressure on those communities trying to balance massive health and human services and education cuts.

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