SEQUESTRATION – IMPACTS ON REAL ESTATE AND OUR LIVES
For weeks, the news has presented non-stop information on how we got into this “sequestration” and who is to blame. The political parties have trumpeted that they’re right and the other guy is wrong. Meanwhile, we’re left to pick our way through the damage… if we can figure out what it will be In this Article, I’ll seek to give you a more on the ground view of what we might expect in the months to come if the current sequestration policy remains in place.
First of all, “sequestration”is simply the name given to a mandatory across-the-board cut in federal spending exempting only a small handful of social safety net programs. It was never intended to take effect but rather was designed by our leaders in Washington to create an alternative so bad, that it would force them to cooperate with each other in solving our nation’s financial problems. Unfortunately, it was too optimistic to expect that our leaders could set-aside their political fighting and instead work together to forge a mutually-acceptable plan. I still believe that they can and eventually will get there, but in the meantime, there will be pain.
The sequester requires $85.4 Billion in cuts this year spread out as follows: Defense – $42.7 Billion (7.9%) Domestic Programs – $28.7 Billion (5.3%) Medicare – $9.9 Billion (2%) Other mandatory cuts – $4 Billion
The administrators running each of those government departments will have the discretion as to how those cuts will be made within their agencies. Here is an analysis of specifics put out by the Office of Management and Budget (OMB):
Defense: – Aircraft purchases by the Air Force and Navy are cut by $3.5 billion. – Military operations across the services are cut by about $13.5 billion. – Military research is cut by $6.3 billion. – State Department diplomatic functions are cut by $650 million
Domestic and Other Mandatory Cuts: Public Safety: – Border security is cut by about $581 million. – Immigration enforcement is cut by about $323 million. – Airport security is cut by about $323 million. – Public housing support is cut by about $1.94 billion. – The FDA is cut by $206 million. – FEMA’s disaster relief budget is cut by $375 million. – The FBI gets cut by $480 million. – The federal prison system gets cut by $355 million. – The Nuclear Regulatory Commission is cut by $55 million – The Energy Department’s program for securing our nukes is cut by $650 million.. – The SEC is cut by $75.6 million. Education: – Head Start gets cut by $406 million, kicking 70,000 kids out of the program. – Special education is cut by $840 million. – The Library of Congress is cut by $31 million. – The United States Holocaust Memorial Museum is cut by $2.6 million.
– The National Institutes of Health get cut by $1.6 billion. – The Centers for Disease Control and Prevention are cut by about $323 million. – Global health programs are cut by $433 million; – the Millenium Challenge Corp. sees a $46 million cut, – USAID gets a cut of about $291 million. Science: – NASA gets cut by $970 million. – The National Science Foundation gets cut by about $388 million. – The Patent and Trademark office is cut by $156 million
For most of us, none of the above cuts will have a direct impact such as loss of jobs. But the indirect impacts will touch us all with a trickle-down layering. For example:
1. Every cut in a government program will result in a loss of some employee jobs and a cut of that departments purchasing. This will reduce the money being spent on everything from groceries to travel to office supplies and more;
2. This will cause a reduction in income, first to businesses contracting with the government which in turn will result in their reduction of jobs and spending; and secondarily to all the other businesses and individuals below as the reductions in spending trickle down through the economy.
3. The still fragile recovering real estate market is dependent upon jobs to fuel new buyers to acquire the remaining upside-down properties which still number in the millions. More people may find themselves unable to hang on. With more homes hitting the market and less buyers available, price growth will stall and maybe even drop.
4. Some commentators, such as Mark Lieberman, as reported in DS News, suggest that people will actually die from the cuts. If the Food and Drug Administration, as a result of the cuts, takes even longer to test and approve potentially life-saving medication or medical treatments, people will die. If the FDA cuts corners to approve medication, people will die; If the US Department of Agriculture can’t keep up its schedule of food safety inspections, people will die; If the US Department of Education is forced to cut back on Head Start or other early childhood education programs, someone-or several someones -15 years from now may not graduate from high school, not to mention college.
Lastly, it is critical to understand that these $85.4 Billion in cuts is just a first step in a 10 year process to reduce our Federal deficit by $1.5 Trillion by 2021. Under the sequester plan there will be additional cuts of $109.3 Billion a year from 2014-2021. Overall, the net effect is to reduce the size of government and reduce our Federal Deficit.
These goals are something that we all may recognize needs to be done, but no-one really wants the effects to hurt them directly. The reality is however, that whether it is by the Sequester or some other agreed-upon Plan, every one of us will feel the pain in one way or another. That will be the price of leaving our grandchildren a Nation that is economically solvent rather than drowning them in unsustainable debt payments. I personally believe that the future of our nation rides on the deficit-reducing budget decisions our leaders make. Whether it is organized negotiation or a messy sequestration, these our steps that we know we must take.
If you or someone you know is facing economic challenges from the economy or from the anticipated impacts of sequestration and don’t know what to do, our BPE Law flat fee Consultation Program can offer knowledge of what to expect and form strategies to achieve your best overall resolution. To schedule a Consultation, please contact our office at (916) 966-2260 or e-mail me at email@example.com
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are upside-down on your loan, especially if you’re facing a real estate or lender dispute, get competent legal advice in your State immediately so that you can determine your best options.