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Sequestration and How It Affects All of Us

Sequestration continues to loom over the U.S. economy with the passage of the American Taxpayer Relief Act (ATRA) of 2012 as we have seen late last year and early this year. 

What is Sequestration? It is an across-the-board set of budget cuts totaling $1.2 trillion over 10 years from defense and non-defense spending.

Sequestration is meant to reduce federal spending and primarily consists of mandating automatic, across-the-board spending cuts for federally funded programs in order to meet national budget goals, and discretionary caps that limit future federal spending. 

The Budget Control Act (BCA) of 2011 mandated sequestration starting Jan. 2, 2013, if Congress could not reduce the federal deficit by $1.2 trillion-$1.5 trillion over a 10-year period. To avoid the Jan. 2, 2013, deadline, Congress passed the American Taxpayer Relief Act (ATRA) of 2012 on Dec. 31, 2012, which modified sequestration to start on March 1, 2013, if Congress cannot negotiate a way to avoid it. With the fiscal year 2012 budget deficit reaching $1.6 trillion and the U.S. national debt at more than $16 trillion, tax reform and efforts to lower the deficit should be the priority for the White House and Congress. Unfortunately there was no bipartisan agreement to avert the legally mandated "sequestration" we will begin to see major budget cuts. These cuts are expected to have significant effect on all sectors of the economy, in particular defense, security and transportation. If you listen to just about anyone from the government to our military officials, it is expected that these budget cuts will result in hundreds of thousands of lost jobs.

In preparation for the impending sequestration, federal agencies have begun to implement the cuts. Various departments have already implemented pre-emptive hiring freezes and have begun to pinpoint ways to save.  Federal contractors have also followed suit by giving their employees layoff notice. 

President Obama has met with congressional leaders to negotiate and avert sequestration.   Both sides took a stance to stand their ground with Republicans appearing firm in their opposition to the prospect of further increases in tax revenue as a solution, which the president has proposed as part of his desired "balanced" approach to reducing the deficit and averting sequestration.  Republicans agreed to tax increases for certain income levels as part of the deal with Pres. Obama. 

I personally will take the stand that we can no longer continue to bear additional taxes to pay for more social programs and entitlements that President Obama and the Democrats are putting forward.  If you look at your paycheck closely, you already lost pretty close to 3% and to a lot of people, this means food on the table, gasoline for one’s transportation to and from work.  

Sequestration will impact all of us.  I work for a defense/government contractor.  We will follow what our customers will do as cost saving measure such as having a one-day furlough if that is what they will do.  This will mean, less pay check and curtailing of expenditures which will affect local businesses. 

This is definitely going to have a trickle effect on all of us. 

What can you personally do?  I think it is in our best interest to understand the issues instead of just listening to other people and the media on their own take on the issue. 

Let your elected officials know what you believe they should be doing such as work on reducing government spending; stop raising taxes; eliminate wastes and redundancies, etc.  If we just stand back and let our elected officials decide what to do for us or we will be stuck with something we will have to live with for a long time. 

So much is at stake and all of us have to actively participate in shaping the direction of our country.  You can contact your elected congressman by going to this website: