Fully canceling sequestration at the beginning of August would likely add 900,000 jobs to the economy but could add up to as many as 1.6 million, according to a new analysis from the Congressional Budget Office. It would also likely increase GDP growth by 0.7 percent but could boost that rate by as much as 1.2 percent.
The CBO also warned that canceling the automatic, across-the-board spending cuts that went into effect in March would mean an increase in government spending of about $14 billion this year and $90 billion next year. Yet the current deficit projections have improved substantially in the past few years and the outlook is pretty good.
Sequestration has already come at a high human cost. Children have been kicked out of Head Start programs. Schools on military bases and Native American reservations are facing impossible choices. The elderly are receiving fewer visits from Meals on Wheels programs. Domestic violence victims are getting less help from shelters and programs across the country. Low-income workers have had their Section 8 housing vouchers rescinded. The homeless have fewer places to turn as they try to get back on their feet.
But it has also come with an economic cost. It already had sliced percentage points off of GDP earlier this year. The International Monetary Fund has lowered its estimate of U.S. growth by 0.2 percentage points thanks to sequestration. Analysts had already predicted the loss of 700,000 jobs this year and a GDP reduction of 0.6 percent.
In fact, even deficit hawks don’t have a reason to love sequestration. The budgetary outlook would actually be much better without the automatic budget cuts.