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'Sequestration' would have painful impacts in Missouri, Illinois

This article first appeared in the St. Louis Beacon, Sept. 14, 2012 - WASHINGTON – Cutbacks in defense spending, curtailed medical research, fewer FBI agents and trimmed services for some military families are among the potential impacts of the budget “sequestration” that would take effect on Jan. 2 if Congress does not approve an alternative.

Those likely federal reductions are outlined in a report, required by Congress, that was issued Friday by the White House Office of Management and Budget. The report estimated some effects of automatic, across-the-board budget cuts – amounting to $1.2 trillion over a decade, but including some exemptions – resulting from last year’s deficit-reduction law.

Calling sequestration “a blunt and indiscriminate instrument” to cut budgets, the OMB said in the report’s introduction that the Obama administration “strongly believes that sequestration is bad policy, and that Congress can and should take action to avoid it by passing a comprehensive and balanced deficit reduction package.”

Lawmakers from Missouri and Illinois who commented Friday said the threatened automatic cuts – particularly on the defense budget, which could impact massive military contracts in the region – showed the need for Congress to overcome partisan bickering, probably in a lame-duck session after the November election, to agree on a deficit plan that is less draconian.

"Now, more than ever, Congress needs to come together and be willing to compromise,” said U.S. Sen. Claire McCaskill, D-Mo., a member of the Senate Armed Services Committee. In a statement Friday, she said the OMB report “shows exactly what’s at stake” in the upcoming negotiations on deficit reduction.

“Republicans and Democrats agreed to sequestration to require both parties to come together and tackle our fiscal challenges - because, unfortunately, the threat of heavy-handed cuts is the only incentive some politicians have to work together,” she said.

U.S. Sen. Roy Blunt, R-Mo., the fifth-ranking Senate Republican, said he was “very concerned by the lack of detail and harmful defense cuts included” in the sequestration report. On Twitter, Blunt added that Obama “must work with congressional Republicans to replace cuts with a plan that doesn't compromise our nation's security.”

The report estimates the level of likely cuts for 1,200 separate line items in the federal budget, taking into account provisions approved by Congress to shield certain priorities like food stamps, Medicaid and Medicare benefits and salaries for military personnel.

Overall, defense spending would be cut by 9.4 percent; non-defense discretionary programs (those which aren’t specifically exempted) would be reduced 8.2 percent; Medicare spending by 2 percent; and other spending by 7.6 percent. The reductions would be larger in the fiscal year that starts Oct. 1 because those cuts would be applied over nine months instead of a full year.

Of special concern in the St. Louis region – where the Boeing Co. fighter aircraft production lines and many military equipment subcontractors are located – are likely Pentagon cutbacks, which the report said “would result in a reduction in readiness of many nondeployed units, delays in investments in new equipment and facilities, cutbacks in equipment repairs, declines in military research and development efforts and reductions in-base services for military families.”

Specifically, according to the report, Air Force and Navy aircraft procurement would be trimmed by more than $4.2 billion; Defense Department operations and maintenance would lose $3.9 billion next year; and military health care would be cut by $3.3 billion.

But many domestic programs also would be hit, including the loss of $2.5 billion by the National Institutes of Health and a decline of $2.3 billion in rental assistance for the needy. Overall, the food stamp program would be cut by $543 million.

While sequestration would not directly impact Medicare benefits, it calls for a 2 percent cutback in the $554 billion that Medicare estimates it will spend on providers and insurance plans next year. A major chunk of that reduction would come from the Federal Hospital Insurance Trust Fund, the report said.

Political infighting and defense worries

GOP presidential nominee Mitt Romney, portraying the sequester cuts as a concept advocated by President Barack Obama in last year's deficit negotiations, has harshly criticized the potential impact of such reductions on the nation’s military strength.

UPDATE “President Obama’s report on sequestration confirmed what we’ve known for months – his defense cuts will devastate our national security and jeopardize jobs across the country," said Romney campaign spokesman Ryan Williams on Saturday. "Americans deserve real leadership from their president and an honest plan to spare the country from these catastrophic cuts.” END UPDATE

Former U.S. Sen. Jim Talent, a senior Romney adviser on defense issues, told the Beacon on Friday that "with the [threatened] sequester, the message being sent is that American power is seriously in decline." 

"I don’t think you can over-estimate the consequences of that around the world," Talent added. "Not just in terms of the actual capabilities of the military, but the message we’re sending about our willingness to sustain our traditional post-World War II role" as a leader in military might.

But U.S. Sen. Dick Durbin, R-Ill., pointing out that the Budget Control Act that included sequestration was approved by a bipartisan majority, says many of the Republicans now criticizing its sequestration provision had voted for the budget bill last year.

This summer, Durbin predicted that – once the November election is over – lawmakers will agree on a deficit-reduction plan that would scrap the sequestration approach.

“With the president's leadership we can come together,” Durbin told CNN. “There's a bipartisan answer here that will reduce the deficit and still create an environment for economic growth.”

Blunt, Durbin and McCaskill had voted for the Budget Control Act, which set up a “super committee” and – if that failed – the sequester trigger. All of them had expected the super committee to reach a deficit deal, which didn’t happen by last Thanksgiving’s deadline, setting in motion the possible sequestration starting on Jan. 2.

One of the few regional lawmakers who voted against the Budget Control Act was U.S. Rep. Todd Akin, R-Wildwood, a member of the House Armed Services Committee, who has been highly critical of the threatened sequestration process, including its potential impact on the nation’s defense.

Earlier this summer, Akin and other House Republicans, voted for a House alternative, called the Sequester Replacement Reconciliation Act, which aimed to shift the burden of budget cuts to non-defense programs. The bill would have replaced the sequester cuts with a hodgepodge of reductions in domestic spending, including defunding parts of the Affordable Care Act, tightening enrollment restrictions for Medicaid, and capping damages on medical malpractice awards. The Senate did not take it up.

In an op-ed last fall, Akin -- the GOP candidate for U.S. Senate -- warned that “Missouri will be hit hard” by such across the board cuts. Citing a study by the Missouri Economic Research and Information Center, with updated data from the House Armed Services Committee, Akin asserted that Missouri “could lose almost 30,000 private sector jobs in the defense industry.”

He wrote that “an additional 4,600 jobs could be lost from cuts to active duty military personnel and Defense Department civilians in Missouri. These cuts would likely result in about $2.2 billion in lost defense contracts for Missouri businesses, and over $1 billion in lost wages for Missouri families.”

Earlier this year, a state-by-state report by the pro-defense Center for Security Policy asserted that possible revenue losses by Missouri’s defense contractors – led by Boeing’s warplane operations in Hazelwood – could amount to $1.63 billion a year, assuming an 18 percent cut. The Illinois loss was estimated at about $1.2 billion a year.

This week, an addendum to the report broke down the contracts at stake by congressional district. According to its figures, firms in Missouri's 1st District -- which includes Boeing -- have received 285 defense contracts worth a total of $3.2 billion. That's the most of the state's current nine congressional districts.

The St. Louis region's 2nd and 3rd District have companies that have obtained $749.6 million and $454.3 million, respectively, in contracts, the report said.

While calculating possible job losses from sequestration is a stretch, the center’s speculative analysis -- made before the OMB report was issued -- suggested that across-the-board cuts could lead to the loss of 2,988 active-duty military and 2,496 civilian defense jobs in Missouri over nine years. Direct and indirect losses of jobs by contractors and suppliers could top 30,000, the study asserts.

In Illinois, the report predicted a loss of 1,685 active duty and 3,943 civilian defense jobs, as well as more than 20,000 direct and indirect job losses by contractors and suppliers.

If Congress takes no action on the “fiscal cliff”of sequestration cuts and the Bush-era tax cuts due to expire at year’s end, the Congressional Budget Office has said it could push the nation back into a recession.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget – a nonpartisan group that advocates long-term deficit reduction -- said Friday in a statement that “the only thing worse than the fiscal cliff is the mountain of debt we face if we continue to defer the hard choices. Moody's has already warned us that this approach would lead to a credit downgrade, in addition to stunting economic growth.”

McCaskill said she has been “proud to be one of a group of independent Senators interested in a compromise plan to tackle the national debt. But so far, the most dug-in politicians in Washington have blocked a compromise to replace the across-the-board cuts with a more balanced plan because they would rather protect huge tax giveaways for multi-millionaires and corporations.”

In her statement, McCaskill added: “This [OMB] report shows exactly what's at stake, and I'm going to keep working as hard as I know how to forge common ground, protect jobs and safeguard our national security.”

Jo Mannies, Beacon political reporter, contributed information for this report.