Bloomberg News

Prisoners Join Astronauts in U.S. Spending-Cut Fallout

February 28, 2013

Prisoners to Join IRS Workers in U.S. Spending-Cut Fallout

Inmates walk along a fenced area while performing work chores at a prison in California. Photographer: Noah Berger/Bloomberg

The U.S. will lock down prisoners, furlough Internal Revenue Service workers, and rely on Russia to get astronauts into space to cope with $85 billion in federal spending reductions due to begin tomorrow.

Defense gets about half the cuts, with the rest spread throughout the federal government. Agencies need to draw equally from every “project, program and activity,” according to a law designed to be so painful leaders would find alternative spending plans. Military pay, veterans’ benefits and Social Security benefits will be exempt from the reductions.

Under the process known as sequestration, President Barack Obama has until 11:59 p.m. tomorrow to issue an order officially putting the cuts into effect. He is to meet tomorrow with congressional leaders.

The parties are far apart over how to replace the cuts totaling $1.2 trillion over nine years, with $85 billion in the remaining seven months of this fiscal year. Democrats insist that tax increases must be part of a replacement plan, an approach Republican leaders oppose.

While Democrats and Republicans say they want to avoid the across-the-board reductions and also must reach agreement on a measure to keep agencies operating after March 27, federal agencies have drawn up plans for allocating the cuts. Still, some of the impact may be delayed because of requirements for 30 days’ notice before employees can be furloughed. Here is a snapshot of how U.S. agencies say the cuts would affect them:

Defense Department

Military programs face $46 billion in cuts through the end of the fiscal year on Sept. 30. Armed forces will be less ready for action, and economic effects will reach every state, according to military officials.

“We will have to make cutbacks and delays in virtually every investment and program in the department, more than 2,500 of them,” Robert Hale, the Pentagon comptroller, said at a Feb. 20 news conference. Cuts would amount to a 9 percent reduction in all Defense Department accounts except for uniformed military personnel, who are exempt, Hale said.

The Pentagon plans to save as much as $5 billion through furloughs of civilian employees beginning in late April, according to Hale. The unpaid leave, averaging one day a week for as many as 22 weeks, amounts to a 20 percent pay cut for as many as 750,000 employees.

Army training would be cut for the 78 percent of units that aren’t already deployed in Afghanistan or South Korea or going this year, according to General Ray Odierno, the Army chief of staff.

Reduced Readiness

The Air Force would cut one or two of 19 F-35 fighter jets that it planned to purchase from Lockheed Martin Corp. (LMT:US) this year, according to General Mark Welsh, the service’s chief of staff. The Air Force also has said it would have to reduce flying hours by as much as 18 percent.

The cuts as written would stay in effect for a full decade, and in that case the Navy’s fleet would be reduced by about 50 ships, according to Admiral Mark Ferguson, vice chief of naval operations.

Lines will be longer at airports and seaports as the Homeland Security department loses the equivalent, in hours, of 5,000 border patrol agents, Secretary Janet Napolitano told a conference in Washington Feb. 26. There will be “serious immediate consequences to the flow of trade and travel,” with longer wait times to clear customs and security at airports, Napolitano told lawmakers Feb. 14.

U.S. Immigration and Customs Enforcement officials have released from custody hundreds of immigrants facing deportation. Under the reductions, the service can’t maintain the 34,000 detention beds mandated by Congress, Napolitano told lawmakers.

Border security is one of the biggest parts of immigration policy, a subject that has gripped Congress since the November election. The department is having an “almost out-of-body experience” trying to tighten security on the 1,969-mile southern border while getting ready to police it with fewer people, Napolitano told reporters at the White House Feb. 25.

Treasury

Cuts would prevent millions of taxpayers from getting answers from IRS call centers and taxpayer assistance centers, and delay IRS response to taxpayers’ letters, Acting Treasury Secretary Neal Wolin said in a Feb. 7 letter.

The agency would review fewer tax returns, and the reduced capacity to detect fraud “could result in billions of dollars in lost revenue,” Wolin said.

IRS employees face five to seven unpaid days, according to an internal agency memo from the acting commissioner, Steven Miller, that was obtained by Bloomberg News. The memo said the furloughs would start after the tax-filing season.

The lack of furloughs until after filing season indicates there will be minimal effect on taxpayer refunds.

Housing

Sequestration may cause the Department of Housing and Urban Development to eliminate rental assistance vouchers for about 125,000 poor families, Secretary Shaun Donovan told lawmakers Feb. 14. About 100,000 formerly homeless people could also lose housing, and 7,300 fewer AIDS patients would receive housing assistance.

Health

The National Institutes of Health, the world’s largest supporter of biomedical research, will have to cut about $1.6 billion from its $31 billion budget, director Francis Collins said in a Feb. 25 conference call.

NIH grant funding “would likely be reduced,” Health and Human Services Secretary Kathleen Sebelius said in a Feb. 1 letter to Senate Appropriations Committee Chairwoman Barbara Mikulski, a Maryland Democrat.

Payments to Medicare providers would be cut less than other spending, with a maximum of 2 percent.

The Food and Drug Administration plans to reduce travel and training, and approvals for new drugs and medical devices will be delayed, spokeswoman Erica Jefferson said in an e-mail.

Justice Department

At the Justice Department, furloughs can’t be avoided and the department will lose the equivalent of more than 1,000 federal agents, Attorney General Eric Holder said in a Feb. 1 letter to Mikulski.

Staffing cuts will reduce the FBI’s investigative capacity, and the Federal Bureau of Prisons will need to increase lockdowns of inmates as staffing shrinks and the prison population holds steady, Holder said. He said he was “acutely concerned about staff and inmate safety.”

Transportation

The Federal Aviation Administration in a Feb. 22 posting on its website said it’s planning to reduce expenditures by $600 million, furlough most of its 47,000 employees for one day per pay period, and close as many as 238 air traffic-control facilities. The shutdowns may curtail traffic to some airports.

Agriculture

Reductions include $333 million from the Women, Infants and Children program that helps poor people buy food.

Waiting lines for the WIC program may lengthen “in a relatively short period of time” after sequestration takes effect, Secretary Tom Vilsack said in a Bloomberg Television interview yesterday.

Food prices will also be affected by the furloughs of meat inspectors required to cut costs, he said. “Every aspect of our operation is going to be impacted,” he said. “You could see activity from the first day of the sequester.”

Education

Cuts will result in layoffs of 40,000 teachers and aides from pre-school through 12th grade, Secretary Arne Duncan said at a White House briefing yesterday. “I don’t think people ever came to Washington with the idea of inflicting harm on their constituents, but that’s exactly what might happen here,” he said.

Commerce

Furloughs at the National Oceanic and Atmospheric Administration run the risk of significantly increasing errors in weather forecasts and compromising government’s ability to warn Americans about hurricanes and tornadoes, Rebecca Blank, a Acting Commerce Secretary, said in a Feb. 8 letter to Mikulski.

Interior

Permitting and leasing for oil and gas production on federal lands would “slow down due to cuts,” Interior Secretary Ken Salazar said in a Feb. 1 letter to Mikulski. The public should be prepared for reduced hours and services at national parks and refuges, he said.

State Department

Sequestration will cut $850 million from the State Department operations budget and $1.7 billion from foreign aid, according to Secretary of State John Kerry. The impact will extend from slowing consular services, such as helping Americans abroad and processing visa applications, to cutting $200 million in humanitarian aid, $70 million in emergency food aid, and $400 million for AIDS relief and other global health programs, he said in a Feb. 11 letter to Mikulski.

Environment

There would be 1,000 fewer inspections to ensure compliance with environmental laws and fewer cleanups of polluted sites, according to a Feb. 6 Environmental Protection Agency memo sent to Mikulski by Bob Perciasepe, the acting administrator. Furloughs will be needed, he said in an e-mail to staff Feb. 26.

Space Exploration

The National Aeronautics and Space Administration would lose about $726 million, and companies including Chicago-based Boeing Co. and Hawthorne, California-based Space Exploration Technologies Corp., headed by billionaire Elon Musk, would see funding slowed for building spacecraft to carry astronauts into orbit.

The delays would extend the period the U.S. will need to rely on Russia for rides to space at about $63 million a seat, according to John Logsdon, a professor at George Washington University and the founder of its Space Policy Institute.

“It’s hard to claim to be a leader in space when you can’t even carry your own people into space,” Logsdon said in an interview.

To contact the reporters on this story: Todd Shields in Washington at tshields3@bloomberg.net; David Lerman in Washington at dlerman1@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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