Much to the dismay of many Americans, $85 billion in sequester “cuts” began on March 2. “Sequestration” is the term that refers to automatic spending cuts across the board of federal agencies totaling $85 billion in 2013. This is a result of the Budget Control Act, signed by President Obama in August of 2011, which also raised the debt ceiling. The sequester provision was a “placeholder” for Congress to take action on a long-term plan for deficit reduction or face automatic cuts. Unfortunately, Congress was unable to compromise on a plan, thus sequestration went into effect.
Although no one truly knows the extent to which the sequestration will impact American citizens, we can anticipate how it will unfold this year. In early to mid-March it is expected that many federal agencies will begin to furlough employees due to budget shortfalls. On March 27, there could potentially be a partial government shutdown if an agreement still isn’t reached. If a government shutdown occurs furloughs may begin in April. All cuts have to be accounted for by September 30 when the federal budget year comes to an end. And October 1 begins the next federal budget year when more sequestration cuts will take shape. According to the Wall Street Journal, the Department of Defense will take the biggest hit at $42.7 billion. Medicare will also get hit with an $11.1 billion cut.
Partisan bickering has not stopped long enough to address the sequestration, but there is hope that a bipartisan plan is possible in the near future. IREM (and CCIM) will continue to closely monitor the effects of the budget cuts and report back when necessary.