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What's The Sequester? And How Did We Get Here?

Transportation Secretary Ray LaHood (left) answers questions during a briefing with White House Press Secretary Jay Carney on Friday.
Win McNamee
Getty Images
Transportation Secretary Ray LaHood (left) answers questions during a briefing with White House Press Secretary Jay Carney on Friday.

They've been everywhere this week: dire warnings about threats posed by across-the-board federal spending cuts.

Unless Congress acts, the cuts are due to take effect a week from Friday. The administration is trying to drive home the ways that could affect you.

For example, Transportation Secretary Ray LaHood warned Friday that air traffic controllers will have to take unpaid days off beginning in April. Fewer controllers on the job could mean airport delays, and some airlines may decide to cancel flights.

"Look, this is very painful for us because it involves our employees," LaHood said. "But it's going to be very painful for the flying public."

LaHood, a former Republican lawmaker, says he has been calling some of his old colleagues in Congress, urging them to undo the automatic spending cuts.

But how much of this is just Washington hype? Here are the answers to four burning questions about the cuts known as "the sequester":

What will actually happen if these cuts do take effect?

President Obama has painted a pretty bleak picture of what will happen if Congress doesn't act to avoid the cuts: kids thrown out of day care; cancer screenings that won't be given. He even said criminals would be let go if the cuts take effect. There's a little bit of hyperbole there. Obama is trying to build public pressure on lawmakers, so he has an incentive to make the cuts seem as scary as possible.

Then there are Republican leaders in Congress, like Senate Minority Leader Mitch McConnell and House Majority Leader Eric Cantor, who say the White House could easily avoid such pain by just cutting wasteful projects. Cantor suggested doing away with a machine that smokes cigarettes for medical research. That's also a bit of a caricature. Republicans want to make it seem as though much of what the government does is useless or even silly.

In fact, we probably won't see criminals set free, no matter what Congress does or doesn't do. But these are real spending cuts. They won't be visible right away. The air traffic furloughs that LaHood mentioned, for example, wouldn't start until April. But eventually the cuts would be felt — and those effects would mount up over time.

Which areas of government will be hit hardest?

By law, these cuts are across the board: half defense, half other programs. Social Security and military pay are exempt. For the most part, Medicare is spared.

But most other parts of government will see their budgets cut. And there's not a lot of leeway for triage or moving money around. The way the law was written, each activity has to give up a similar proportion of its budget.

How will this affect the economy?

Well, it doesn't help. People's paychecks already took a hit this year when the payroll tax went up. They're paying more at the gas pump. And now, if the government tightens its belt, that's another blow to the economy.

But as the forecasting firm Macroeconomic Advisers said this week, it's not "catastrophic." It's not as bad as the "fiscal cliff" would have been, and certainly not as bad as breaching the debt ceiling. But it does take a bite out of economic growth — something in excess of half a percentage point.

And remember, the economy's not growing very fast to begin with. Slower growth means fewer jobs. Macroeconomic Advisers estimated we'd see about 700,000 fewer jobs by the end of next year if the sequester goes into effect and isn't changed.

So how did we get into this position? And how do we get out?

At heart, we got here because the two political parties can't agree on what size government we want or are willing to pay for.

Back in 2011, congressional Republicans demanded spending cuts in exchange for raising the debt ceiling. The two parties couldn't agree on that, so they punted and said if they couldn't make a deal by 2013, they would just do these automatic cuts that nobody likes.

In other words, the cuts were supposed to be a crowbar to pry open our gridlocked political process. But now it is 2013, the gridlock is still with us, and so we're using the crowbar to beat ourselves over the head.

If that gets painful enough, maybe lawmakers will agree to do something different. More likely, they will limp along until the next congressional deadline in late March. That's when the government's spending authority runs out. That would also be the next big showdown between the parties over what size government we want.

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Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.