Sequester could lead to agencies asking for more money, shrink taxpayer base

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Sequestration will have unexpected consequences like increasing funding requests from certain agencies or potentially shrinking the taxpayer base, agenices told the Senate Appropriations Committee last week.

The $551 million set to be cut from the Commerce Department will lead to the Census Bureau asking for more money than currently planned when it comes time to take the 2020 Decennial Census, Deputy Secretary of Commerce Rebecca Blank told the committee in a letter (.pdf).

"Cuts now are virtually guaranteed to force the Census Bureau to ask for larger investments later," she writes, because the bureau will not be able to finish developing new, cost-saving census techniques. Sequestration will leave hundreds of vacancies unfilled and the bureau will also have reduced funds for contract research projects.

Sequestration will also make it harder for the agency to accurately monitor and understand current economic conditions, says Blank.

The Census Bureau's next assessment of gross domestic product and other key economic indicators will have to be delayed by six-months "putting at risk our ability to take accurate stock of current economic conditions and well-being," she says, and this will likely impact policies and economic decisions in the private sector as well.

The last set of GDP and other economic data was taken in 2007, prior to the recession, Blank writes.

Other economic impacts include a loss of $15 million that would go to assisting business efforts to increase exports and reach more foreign markets.

Secretary of State John Kerry also submitted a letter (.pdf) to the committee saying that his department would see cuts that remove a separate $400 million in economic assistance that supports U.S. exports reaching overseas markets.

Kerry also said State would have to reduce export promotion programs that help American businesses identify and pursue trade opportunities that create jobs in the United States. Kerry said cuts could mean reduced federal tax revenue.

The Labor Department has also submitted a letter (.pdf) saying sequester would prevent it from finding jobs for tens of thousands of veterans as well as assisting other newly unemployed workers. Acting Labor Secretary Seth Harris says this is a great concern because "economists and the Congressional Budget Office predict there will be an increase in unemployment if sequestration occurs."

For more:
go to the Appropriations hearing's webpage for copies of agency letters

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