Ending the across-the-board spending cuts mandated by the 2011 congressional debt ceiling deal would increase employment by nearly 1 million jobs by next year, according to Congressional Budget Office projections released Thursday.
The CBO analyzed the impact of canceling the cuts known as sequestration in response to a request from Rep. Chris Van Hollen of Maryland, the ranking Democrat on the House Budget Committee.
The CBO said removing the cuts would increase federal spending by $14 billion in fiscal 2013, which ends Sept. 30, and by $90 billion in fiscal 2014, and raise real gross domestic product by 0.7 percent. Employment would be between 300,000 and 1.6 million higher by the fall of 2014, with 900,000 being the CBO’s midpoint estimate.
Previously, the CBO had projected that the sequester would reduce employment by 750,000 jobs through fiscal 2013.
Sequestration, which was enacted as a fallback option in the Budget Control Act when congressional negotiators failed to agree on budget reduction measures following the 2011 debt ceiling crisis, mandates automatic spending cuts through 2021. For 2014, those spending cuts take the form of spending caps on appropriated funds, allowing appropriators more discretion in targeting the cuts.
President Obama and members of Congress issued dire warnings about the impact of sequestration cuts earlier in the year. So far, however, few signs of any major pain from the sequester have shown up in economic data. Nevertheless, the CBO has consistently projected that the effect of the broad-based cuts would be slower growth than otherwise would have occurred, rather than a sudden shock.