MEMPHIS, TN (abc24.com) - There is only one week left to avoid one of the largest federal budget cuts in history. If Congress can't reach a deal, sequestration would begin on March 1. Congress is eight days away from the deadline that could mean a million jobs lost.
Chief Economist for McVean trading investments, Michael Drury, says soon everyone will know the term 'sequestration.' "On March 1st spending will be cut in the federal budget by $85 billion."
Drury says the entire economy is headed for trouble. That's when massive across-the-board cuts in the federal budget are scheduled to kick in automatically. "A 10% cut across the board, you're talking somewhere around one million jobs in the U.S. over the next six months," Drury explains.
The sequester cuts are a result of the 2011 debt ceiling crisis. "(Congress) agreed to these very harsh cuts that were going to happen right after the election, both sides assuming their side was going to win," Drury explains, "therefore they'd be able to change the law to work for their side." Now, no one's willing to budge, which means automatic cuts across the board. Defense, parks, air traffic, even local schools and law enforcement could suffer.
Congress will likely delay the cuts until the end of March, giving them one more month to figure it out.
Drury expects a resolution that would mean a smaller impact this year but larger in years to come. "Just the same way state and local governments have had to cut back over the last four to five years, this is now happening at the federal level."
Among the $85 billion in cuts, half will fall on the Department of Defense. "People who are working in Millington will feel it more than anyone else because they're closest to that." Drury explains, "Then anybody who's working for a related field, if you're working for industries relying on defense spending or spending handed through the courts or immigration, you'll be affected."
The Department of Defense is expected to enact furloughs. That means a nearly 20 percent pay cut for employees. That means military, the FBI, even your airport security screeners - which could also mean significant delays for travelers going through security.
The other half of the cuts, "Fall through to the state and local level in the form of reduced block grants, which fund things like education and police and streets and highways," Drury explains. He says the impact won't be as great there; it's about 400,000 jobs spread across the country.
Drury likens Congress to calling 'fire' in a crowded theater. "The government is saying were going to lay-off all the air traffic controllers, we're going to lay-off all the meat inspectors, we're going to close the state parks you want to go to on spring break because that gets the strongest political reaction where you'll call your Congressman and say, 'Please, don't do this.'"
The cuts could be minimized if Congress and the President can reach an agreement by the March first deadline. "As we saw in the debt ceiling and fiscal cliff, they ultimately come to fairly reasonable decisions," Drury says, "you have to protect yourself, but there's probably not going to be a disaster."
Drury says the Government has never imposed cuts of this magnitude before. Programs like Medicare, Medicaid and Social Security are exempt from the cuts.