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Loss of federal jobs: Coming soon to your community

By Ken Root

In the next two years, it is clear to me that we are going to have a reduction in the size of the federal government. It is not something that Congress is going to do willingly because it only brings public outcry against them so our bold and brave representatives have set it up so the cuts are put in place as far in the future as possible and with little direct input from them, sort of like closing military bases. The reality for Americans is that there will be a reduction in federal jobs that will reach out to all communities, large and small, and will have a negative economic and social impact.

We don't realize how many jobs are connected to the federal government. Even departments within state and county government have base funding that comes from federal dollars. When this revenue source starts to pull away, political subdivisions will have to determine whether to step in and fund the positions or let them disappear. If funded, that will raise local taxes and likely lower the income of the individual who is hired by the county or state rather than by the feds.

Anyone holding elected office in 2013 will be faced with the task of reducing government spending. It is a "have to" case, as the administration and Congress of 2010-2012 saw no advantage in defining the spending reductions needed to keep the country operating. They tried printing more money and other maneuvers but none have done more than put off the inevitable. The goal of this Congress has been to talk about the hard reality of cutting spending but not do so. Sen. Charles Grassley of Iowa has a lot of savvy on how Congress operates and says the upcoming lame duck session may not have much activity if a Republican is elected to the presidency. He suggests that the outgoing congressional members and president will push decisions into 2013 because there is no upside for them to institute reductions on their watch.

That means we are likely to see some contortions and a major mood swing in the next Congress. First, there are tax increases that will go into effect at the end of the year if Congress does nothing. Right now, that is their specialty. I'm not the first to predict that they will fail to act this term but try to come back in January and save us from the savagery of a major jump in the inheritance tax and higher rates on capital gains that they caused by not changing the law this year. Sort of like setting fire to a house and then running in to put it out and declaring yourself a hero.

The business of the next Congress will be to cut spending. Predictions are that the federal government will have to shrink in size by 8 to 20 percent. When you spread that all the way through federal agencies, it means that about one in five, to one in ten jobs will be eliminated. The impact will be very significant.

How the distribution will be done is unknown. It may be that the big agencies will be hit first with an efficiency audit that is without compassion. An auditor may find two people doing the same job and remove one. It may find that an entire operational division should be closed. We have seen something of this type of cuts in USDA Extension and other programs but 2013-2014 will require cuts that are far beyond anything yet accomplished. Asking Secretary of Agriculture Tom Vilsack about downsizing the USDA, he almost looks eager to try. Former Ag Secretary Dan Glickman said last week: "It can be done, but it won't be easy."

The military could absorb half the total cuts required by government, but under a Republican administration, even the most conservative budget hawk will fight to keep the Pentagon's reductions small.

Back home, where we will actually see and feel the change, there is no job that won't be scrutinized. Direct federal job losses will be first but the revenue that is now going to state and local governments will require the same examination and elimination of people and services.

Where we wind up is a real question for economists and social scientists. Some of the fired federal employees will take private sector jobs. They will displace workers who have lower incomes and are less qualified to find other employment. I think it is called "lose-lose" as the past federal worker gets a lower paying job and the private sector employee gets fired. Does that create a class of long-term unemployed that we thought only existed in Europe?

Now, the big question for baby boomers: Will Congress be bombarded by criticism from displaced younger workers so that they decide to cut social programs including Social Security, Medicare and Medicaid? We worked for our whole adult lives under the premise that we had a "contract" with government to fund our retirement. Cutting entitlements would have a huge backlash that could lead to a one-term president and single term members of Congress. Who would we elect in their place? What could a new member of Congress do to reinstate retirement benefits?

Will it be this harsh? I don't think we know how it will play out because we don't know whether our economy will turn upward on the short term or an era of prosperity awaits fiscal responsibility. It does show that there is always a day of reckoning. Growth of government programs has been increasing since the Lyndon B. Johnson administration of the 1960s. It is remarkable that we have been able to push our debt forward for this long. The testament to our character is whether we can realign spending with realistic income and accomplish the purposes of helping our fellow citizens rather than just saying the right thing and doing the wrong thing to get re-elected.

Editor's note: Ken Root has been an agricultural reporter for 37 years. Root now does daily radio and television programming and is a columnist. He can be reached at kenroot@gmail.com.

Date: 11/5/2012



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