Obama at the White House on Friday. (AFP)
Washington, March 1: Sequester, meat cleaver, fiscal cliff, ATRA, ATM…
In the plush watering holes in downtown Washington where US Congressmen, lobbyists and defence contractors lift their elbows to bring heavy crystal pint glasses to their lips, an alphabet soup of acronyms and strange-sounding financial phrases are about the only topics of conversation these days.
But as America stares at $85 billion in mandatory spending cuts that are set to take effect at midnight on Friday, almost two-thirds of the people in this country have no idea of what “sequester”, the official term for these cuts, means.
President Barack Obama’s administration has warned that the cuts will mean criminals now locked-up in prisons will roam the streets free because prison budgets will be pruned so steeply that convicts can no longer be held behind bars. Thousands of schoolteachers would be laid off and the US would be vulnerable to a terrorist attack.
“If Congress allows this meat cleaver approach to take place, it will jeopardise our military readiness, it will eviscerate job-creating investments in education and energy and medical research,” Obama painted a dire picture of what America is heading into. “Meat cleaver” is another word that is doing the rounds of television newsrooms these days.
The setting for Obama’s remarks was the White House and in order to create the maximum impact, the President was flanked by firefighters in uniform when he spoke. But the expressions on the faces of the firefighters showed nothing to suggest that they understood the gravity of what lay ahead or that at least some of them may lose their jobs.
That was not surprising since even Obama, who has a knack of straight-talking to people in words they can grasp has been jargon-mongering although he passed the responsibility for it to economists. Read this: “I should point out, and I am sure you have heard from a number of experts and economists that this is not a cliff, but it is a tumble downward,” the President said elsewhere two days ago.
What he meant to say — and he did so later in the same speech — was that “it is conceivable that in the first week, the first two weeks, the first three weeks, the first month... a lot of people may not notice the full impact of the sequester.”
A poll on behalf of The Hill, an unofficial Congressional newspaper here, revealed that almost two-thirds of Americans have no idea of what “sequester” means notwithstanding an ongoing obsession with the word, and similar others, on the Beltway, Washington’s equivalent of the Ring Road that goes round New Delhi.
Even among those who had heard of the term, most Americans erred in its meaning: some thought it was a process for depriving an elected official of his office, others thought it described a Supreme Court judgment on the federal budget while the biggest chunk in this group — roughly one in five — understood it wrongly as the US exceeding its debt limit.
Sequester is actually short for sequestration and in the current political and economic parlance it means an automatic trigger of spending cuts under law to resolve budget gaps. The meaning has evolved from its original to denote government action in seizing the goods of citizens in lieu of dues.
With the Senate prevented yesterday by Republicans from using a procedure called “filibuster” requiring a 60 per cent vote from passing legislation to temporarily postpone imminent spending cuts, Obama must order by midnight the cuts calculated by his Office of Management and Budget (OMB) to cover fiscal gaps.
A report must then be sent to the US Congress confirming the total cuts. Each government department will, thereafter, begin the process of adjusting to living within their reduced means. Anticipating the sequester most wings of the government have already prepared plans to tighten their belts without waiting for tonight’s deadline.
Since 30 days notice must be given to employees who are sent on furlough, actual job losses estimated by the non-partisan Congressional Budget Office, at three quarters of a million, will begin to kick in on April 1.
This office estimates a decline in gross domestic product by half per cent because of these measures. If nothing is done by the end of this month to reverse sequestration, “fiscal cliff”, another popular jargon among Beltway economists, will be triggered since a stop-gap arrangement agreed in January to address only the revenue side of US finances — and not spending — will expire on March 27.
Some economists prefer the term “fiscal slope” this time because of its gradual effects.
Then by April 15 if a new budget is not passed by Congress, Senators and members of the House of Representatives risk their salaries being withheld under a “No Budget, No Pay” Act adopted last month.
But the real test for the US economy caught up in all this jargon will come in May when a new debate on America’s debt ceiling which was postponed by the fiscal cliff agreement is set to restart. All of which does not bode well for the economy, still recovering from the 2008 recession.