ARLINGTON, Va., Feb. 25 (UPI) — The $85 billion in looming U.S. spending cuts will likely occur, most economists, analysts, academics and policymakers said in a survey released Monday.
Twenty-nine of 49 panelists, or nearly 60 percent of the panel, told the National Association for Business Economics’ February Outlook Survey they expected the sequester to occur Friday in either partial form or full form.
The sequester is the Washington term for across-the-board federal domestic and military spending cuts passed by Congress that will be automatically triggered Friday and run through September unless lawmakers intervene.
The cuts — established as part of the 2011 deal to raise the federal debt limit — represent a small slice of the government’s annual $3.5 trillion budget, and big-ticket programs such as Social Security and Medicare benefits are exempt from them.
The cuts are expected to be phased in gradually over several months.
Congress was to return Monday after a weeklong recess, four days before the Friday deadline — which was already moved once, at the start of the year, to give Republicans and Democrats additional time to negotiate.
More than a quarter of the NABE panelists said they believed sequestration would be further deferred, and about 13 percent said they thought sequestration would be avoided altogether.
The negative sentiment of the panelists’ majority reflects a “frustration the business community is feeling about the inability of Washington to get its act together,” Federal Reserve Bank of Chicago Senior Economist and Economic Adviser William A. Strauss told United Press International Sunday night.
Strauss said the U.S. economy would likely be showing “a much better performance” if there weren’t uncertainty over the sequester and whether Congress will keep the government funded after March 27.
A stopgap spending plan, called a continuing resolution, is expected to be taken up by the House the week of March 4.
A faction of House conservatives said it persuaded GOP leadership to postpone any action on the joint House-Senate continuing resolution until after sequestration kicks in, a Republican aide told the National Journal.
Members of the faction said their aim was to make sure the continuing resolution — which provides funding for existing federal programs at current or reduced levels — reflected the lower spending levels achieved by the sequestration’s automatic spending cuts, the Journal said.
The NABE panelists, who were surveyed Jan. 28 to Feb. 5, forecast the amount of money government spends on goods and services would slide 1 percent this year.
Consumer spending would continue to grow at last year’s 1.9 percent rate and accelerate to 2.5 percent next year, the panel forecast.
With jobs, the panelists said they expected job growth to show employers adding an average 170,000 jobs a month this year and 193,000 a month next year. These figures are close to 2012’s average monthly average of 180,000 payroll positions, NABE pointed out.
The national unemployment rate, currently 7.9 percent, is likely to fall to an average 7.7 percent this year and 7.2 percent in 2014, the panelists said.
They forecast it would be 7.5 percent in the last three months of this year.
Washington’s fiscal concerns may be “making businesses quite cautious in their hiring,” Strauss told UPI.
“We would love to see [employers add] north of 200,000 [jobs a month] for quite a bit of time, but it’s not until the final quarter of 2014 that the number comes in at 200,000,” he said.
Strauss added he saw “very, very slow progress” before the United States reached “the natural rate of unemployment,” which is widely considered 5.25 percent to 6 percent.
Copyright 2013 United Press International, Inc. (UPI).