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Buddy Carter: The fiscal cliff

By   /   November 26, 2012  /   Comments

One of my favorite movie scenes is in Butch Cassidy and the Sundance Kid.  Butch and the Kid are surrounded by their pursuers and have no other choice but to jump off of a steep cliff into a river far below.  The conversation goes like this:

Butch Cassidy: Alright. I’ll jump first.
Sundance Kid: No.
Butch Cassidy: Then you jump first.
Sundance Kid: No, I said.
Butch Cassidy: What’s the matter with you?
Sundance Kid: I can’t swim.
Butch Cassidy: Are you crazy? The fall will probably kill you.

A similar situation faces our nation today in what is being referred to as the “Fiscal Cliff.”  This is a series of laws that go into effect in January 2013 that some say could potentially lead us back into another recession or perhaps even worse.

Some of the things included in the fiscal cliff are the expiration of the Bush Era tax cuts, expiration of the 2% Social Security payroll tax cut, implementation of new taxes due to the Affordable Care Act and sequestration cuts to federal spending.

Any one of these measures would have a significant impact on taxpayers in our state and nation but collectively their impact could be devastating.

While all of these measures are important, of particular interest to Georgia state leaders is the issue of sequestration- automatic spending reductions for select federal programs.

Sequestration came about in August 2011 when Congress was deadlocked on the decision to raise the debt limit and, as a compromise, passed the Budget Control Act (BCA) of 2011.  The BCA mandated the creation of the Joint Select Committee of Deficit Reduction and tasked them with reducing the deficit by $1.2 trillion over a ten year period beginning in January.  If they failed to come up with a plan, as they ultimately did, the BCA called for automatic cuts to certain programs- sequestration- that are scheduled to go into effect on January 2, 2013.

In Georgia, we currently receive two major types of federal funding:  direct grants to the state, local and non- profit organizations; and payments, benefits and salaries that pass directly to recipients or providers such as Social Security, Medicare, and Federal employee salaries including military personnel.

For FFY 2009, it is reported that Georgia received roughly $87 billion in federal funds.

It is important to note that programs such as Social Security, Medicaid, Food Stamps, and Children’s Health Insurance Programs (PeachCare in Georgia) are exempt from the reductions in sequestration.

So what programs does that leave in the Georgia state budget that could potentially be impacted?

The two state agencies receiving the largest amount of funds from the federal government covered by sequestration are the Department of Public Health (DPH) and the Department of Education (DOE).   It is estimated that in FY2013 Georgia could lose $220 million in direct federal grants alone, primarily to these two programs.

While this is, of course, of concern to the state, the greatest concern is the impact sequestration could have on the military installations in our state.

Georgia is blessed to be home to 13 military bases.  With the exception of the Coast Guard, every branch of the military is represented in our state making us fifth in the nation in military population.

Why is that a problem?  More than one-third- $492 billion- of the mandatory sequestration cuts set to take place will be made to defense spending.   Combine that with the $487 billion in cuts that the President has already proposed in his budget and you can see why there is concern in our state.

It is estimated that sequestration could result in a loss of 28,000 jobs in Georgia with Fort Stewart and the Hinesville area potentially facing the loss of 7,000 jobs.

Talk to anyone in cities throughout Georgia that are home to military bases and they’ll tell you how devastating this could be.  The “ripple effect” that will be felt in these communities by these potential cuts will be horrendous and will be felt all the way to Atlanta, our state capitol, where it will have just as devastating of an effect on our state’s budget.

Sound scary?  It is.

But like Butch Cassidy and the Sundance Kid we will survive- if the fall doesn’t kill us first.

 

Senator Buddy Carter can be reached at Coverdell Legislative Office Building (C.L.O.B.) Room 301-A, Atlanta, GA, 30334. 
His Capitol office number is 404-656-5109. You can connect with him on Facebook at facebook.com/buddycarterga or 
follow him on Twitter @Buddy_Carter. 
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