Major spending cuts for the military and a slew of government programs are still looming.
In a New Year's night vote, Congress passed the fiscal cliff compromise bill. The legislation raises taxes on the wealthiest Americans and avoids across-the-board tax increases.
However, major funding cuts, deemed "the sequestration," have been postponed for two months. Legislators still need to make tough decisions on which cuts to make and what taxes to raise, so that these automatic major reductions to the budget, don't happen.
Policy experts like Ron Jordan of Advantus Strategies, say the sequestration was never meant to actually happen. It was part of a deal in Congress to raise the debt ceiling. However, if compromises can't be made in 57 days, hundreds of billions of dollars would automatically be cut from the military and a string of government programs.
The Department of Defense is slated to lose $500 billion. The U.S. Secretary of Defense has called the sequestration devastating to the military. If it goes through, the Pentagon has said it would begin giving furloughs to thousands of civilian workers. Jordan says cutting defense money have a major impact on Virginia, because of its large military presence. It would also mean less money to pay local businesses contracting with the Defense Department.
"That will ripple throughout the Virginia economy because those people wont be paying (taxes) as they're laid off… Companies wont be paying corporate income taxes," explained Jordan.
The other half of the cuts would affect funding to federal programs at home, like education, the space program and farming. Some experts estimate 2 million Americans across all sectors of the economy could lose their jobs.
If the sequestration happens, education wouldn't see cuts until the 2013-2014 school year, except for one program which gives more than a billion dollars to nearly 1,200 schools across the country.
Jordan says the only solution is to compromise- softening the blow on both slashing the budget and raising taxes.
"These cuts are going to be painful, and to solve the debt problem is going to be painful. But it can be done in a way to minimize the pain, and do it over a long period of time," said Jordan.
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