Feb. 28, 2013 – Barring an agreement between Congress and the White House, it appears that a sequestration of billions in federal budget dollars is set to commence Friday, and administration officials, lawmakers and finance experts say it will have a sobering economic impact.
With little time left to find an agreement – though Congress is no stranger to 11th-hour action – personal finance experts are urging consumers to look at their finances now and see what expenditures can be put off and what debt can be reduced until a better economic time.
Briefly, the spending cuts from this event would be split 50-50 between defense and the rest of federal government operations. Observers say this would reach beyond the direct recipients of federal dollars – the military, other federal workers, government contractors and recipients of federal recurring benefits, etc. – since it would reduce the dollars those individuals would have to spend on other services and products.
The Congressional Budget Office says a sequester would reduce real GDP by an estimated 0.5 percent. Federal Reserve Chairman Ben Bernanke warned of the impact of a sequester in testimony this week before the Senate Banking Committee and House Financial Services Committee.
NAFCU is reaching out to credit unions whose members would be affected by a sequester. It also remains in contact with defense and other federal offices on the sequester and on the continuing resolution that expires March 27.
The C.R., in place due to lack of agreement on 2013 appropriations, keeps federal operations funded at 2012 levels. If another C.R. follows, it could be used to also modify the distribution of spending cuts that could begin this Friday.
The White House has been in contact with constituents, industry and others on the sequester. NAFCU regulatory staff participated in an invitation-only call with the White House Tuesday. The president is also meeting with congressional leaders Friday.
A breakdown of how the sequester will unfold and affect particular states is on the White House website.