Sequester also to hit nondefense spending

While the Pentagon will take the brunt of the $85 billion across-the-board automatic spending cuts scheduled to kick in March 1, about half of the “sequesters” are poised to bite domestic programs — from child-nutrition programs to air-traffic control to the Internal Revenue Service.

The series of cuts in federal spending — set into motion by the 2011 debt deal and delayed two months as part of the New Year’s Eve deal to avoid the “fiscal cliff” — would reduce the budgets of most agencies and programs by almost 8 percent to 10 percent. A few notable exemptions apply, such as Social Security, veterans programs and Pell education grants. And the sequester spared Medicare from a 2 percent cut to medical providers.

But most other government agencies are bracing to tighten their money belts further.

“The ripple effect of the sequester is going to be felt by everyone, not just defense contractors and their employees, not just people who work for the government,” said Steve Bell, senior director of the Bipartisan Policy Center’s Economic Policy Project. “This will have a negative impact … on almost probably every region of the country.”

The Health and Human Services Department is poised to be one of the biggest nondefense sequester casualties. The department last year said up to 100,000 children would lose Head Start program services and about 80,000 fewer children would receive child care assistance because of the cuts. It also said 12,150 fewer patients would receive benefits from the AIDS Drug Assistance Program, and about 169,000 fewer individuals would be admitted to substance-abuse programs.

The sequester also may hinder HHS’ ability to implement President Obama’s health care initiative, especially with open enrollment for state “exchanges” — the marketplaces where individuals and small businesses can shop for the most affordable health care coverage and where many will get help from the government to pay their premiums — set to begin in October.

The National Institutes of Health, a division of HHS, says it stands to lose more than 2,000 research project grants.

Air travelers also likely will be affected, as the Federal Aviation Administration has said it could suffer “drastic” cuts to air-traffic control services, airport security measures and its long-awaited “NextGen” satellite-based air-traffic control system.

The National Air Traffic Controllers Association warned that sequestration could result in the furloughing of up to 2,200 air-traffic controllers, about 12 percent of the workforce. Meanwhile, federal law enforcers, from the FBI to the IRS, could be hit with furloughs, layoffs or hiring freeze as a result of the cuts.

While the percentage size of the across-the-board cuts would be similar, smaller agencies and programs stand to be disproportionately hurt.

“A 7 percent cut off a very small program is going to be a little harder to take,” said Joseph Antos, a health care policy specialist with the American Enterprise Institute. “The larger anything is, the more flexibility — the more, frankly, slop — there is.”

Agencies and departments, therefore, may try to protect favored programs by merging them into others so as to lessen the blow of the sequester knife, or sacrifice others by isolating them. In these cases, the administration’s Office of Management and Budget could play a key role in refereeing how the cuts are administered.

“There’s always going to be some dispute down there in the lower management level about ’does my program go in Box A or Box B?’ So absolutely there’s going to be a lot of confusion,” Mr. Antos said.

While the sequester process is loathed by both political parties, there is a growing movement among congressional Republicans to let the cuts take effect, saying it’s the only way they will be able to wrangle real spending cuts from President Obama.

But Isabel Sawhill, a federal-budget specialist with the Brookings Institution, said such an approach is “pennywise and pound foolish” because it would undercut federal programs that drive the economy.

“I’m sure there are [sequester targets] that should be reformed or eliminated or at least curtailed. But I think there are other things that are working and should not be reduced, and probably should be increased if we care about economic growth,” said Ms. Sawhill, who served as an associate director at the White House’s Office of Management and Budget during the Clinton administration.

And with the White House and others saying the mere threat of the automatic cuts in part caused the gross domestic product to shrink by 0.1 percent at the end of last year, economists say the result could be far worse if the sequesters kick in.

“This is, in our opinion, likely to cause further contraction of growth in the GDP,” said Mr. Bell of the Bipartisan Policy Center. “When you have growth as sluggish as ours, that’s enough to really be a little bit concerning.”