How will the sequester affect you?

The U.S. Capitol in Washington, D.C.

Sequester -- maybe the only good thing you can say is that it's a heck of a Scrabble word. Our political leaders couldn't cut a budget deal, so the poison pill of spending cuts they deliberately designed to be too bitter to swallow is now stuck in our national throat. President Obama warned of dire consequences. But we'll leave the politics of this mess to others. What Marketplace Money wants to know, as usual, is how this will affect ordinary people. We're not thinking about aircraft carriers and corporate profits, although those are important. We're thinking about retirement funds and credit card rates. And what will all this economic uncertainty do to our lives? Bottom line: How much doom and gloom do we need to be ready for? Here to advise us on how much Sequester Prozac we're going to need is economist and author Julianne Malveaux.

When we go to work on Monday, will we find that the sky has fallen?

"No, the sky doesn't fall on Monday. The sky probably falls on March 27 when we go again to see whether we'll close government. In the meantime, I think we've already seen the effect of sequester on consumers. Spending at Walmart went down. Now Walmart is where you can get the cheapest stuff. So it suggests that even working class people are being very careful about what they're spending and we know that spending is what drives the market.

Will this affect retirement plans? Interest rates? Ability to get a loan? How will this affect ordinary consumers?

"If you work for the federal government, you're going to have less money in your pocket. If you work for somebody who supports the federal government -- say the restaurant around the corner from the Treasury Department, you're going to see fewer customers coming in. People are going to be cutting back. One of the stories that I found very interesting is I was in the airport last week and the line was a little bit longer than usual. I sort of grumbled a little bit and the woman who was checking me in said, 'If we have the sequester, you're going to have to wait even longer.' Now again, that's not going to happen in March, it'll happen in April. So we're going into the busy summer season for travel and you can expect people to stand in lines a bit longer. Now I can't say how much longer, but they're already talking about some smaller airports being closed. Now some people say that these are scare tactics. Now I'm not sure, if you're asking for cuts across the board, that TSA won't be cut," says Malveaux.

The U.S. boasts the largest economy in the world. Should we be concerned that lawmakers can't balance America's budget?

"One of the other issues of sequester in taking roughly 6 percent out of our budget is that it will cause recession. That's unquestionable. Austerity has not worked in Europe and it's not going to work in the United States. Our economy is sitting on this precipice of recovery and going back down to recession. So if we have recession, we have world recession. Now for you personally, we should always maintain the best personal finances that we can. Using your credit card to pay for your lunch, unless you can pay it back at the end of the month, is a really bad idea. You don't want to spend 20 percent interest on lunch. That's one of the things that people need to think about: How much do I owe? Do I have a plan to pay it back? That's the same thing that the International Monetary Fund has asked the United States to do. They're not saying that we have to sequester, they're saying to come up with a plan. What we have is a monthly emergency. I think the American people are getting tired of an emergency of the month," says Malveaux.

Malveaux says as of this moment the sky hasn't fallen, but it might fall in April and certainly if lawmakers can't agree on a budget, we'll see government close down.

To hear stories of how Linda Harlow and Erika Townes -- two women affected by sequester cuts -- are planning their survival strategies, click on the audio player above.

About the author

David Lazarus is an American business and consumer columnist for the Los Angeles Times.
Log in to post12 Comments


How will sequester effect me? Not very much but generally positive. My future taxes will be a little lower thanks to the tiny reduction is debt, my interest rates will be a little lower since I'm not having to compete quite as much with my federal government for money to borrow. I'll be a lot better off if people can see that we have way to much government to afford and that we need to start doing actual cuts, not just cuts in the rate of growth like the sequester is. Perhaps this will also be an opportunity to examine how much TSA we really need and if preventing meat production is valid concern of the federal government.

Last week our director talked to all of us (I'm a federal employee) where he told us no one was to be furloughed. It's because he's making his cuts elsewhere. Marketplace is usually a bit left of center but fell of the edge of the world on this article. Ms. Malveaux did a great job with left wing talking points. Where are the thousands of teachers pick slips? The fear mongering I heard in the last two weeks makes me weep for our great country. Our president even threatened a veto of a bill which would give him power to make these paltry cuts with more discretion. What a shameful admission. As a fed for over 35 years I can tell you we waste more before 9:00 AM than most businesses do all day. The $85B cuts are nothing compared to the big pie. BusyPoorDad had it all right. The cuts will be about half of that. It is the executive branch that will make those cuts in a hurtful way because that will move their agenda forward. We need some adult leadership. Unfortunately we got what we paid for.

Malveaux said "One of the other issues of sequester in taking roughly 6 percent out of our budget is that it will cause recession. That's unquestionable."

I don't think she knows how to do math. First off, the max amount of the cuts is $80 billion, most likely it will just be $40 billion. Out of $3,600 billion. Yet last year the Fed Gov spent $3,500 billion, so these "cuts" are really just not increasing spending as much.

Second, will the government spending $80 billion less "throw the economy" into a recession? Hmm, the economy is $16,400 billion a year. Is not borrowing $80 billion (and not spending that borrowed money) going to stop all economic growth? Or will not borrowing $80 billion by the Fed Gov free up $80 billion to be borrowed by productive businesses and citizens?

It is just $80 out of $16,400. Really, is the world going to end because of this? No. We still have the Fed Gov spending more this year than last year. My pay did not go up last year or the year before that not is likely to go up this year. I have had to cut back but I've done it smart, we stopped wasting money and paid off debt.

No one in the media wants to talk about the $460 billion interest payments the Fed Gov makes every year. how about we cut that?

Dr. Julianne Malveaux is an African-American economist, author, liberal social and political commentator, and businesswoman. She is well known for her left-wing political opinions.

In other words her analysis is colored by her political affiliations. Recession is not predicted by any mainstream economists.

it is time for people to step and be responsible for their care. I am tired of paying for translators for people who are either here legally or illegally. If someone wants to sponsor an immigrant then they should provide the translator. It is time that we quit subsidizing the poor with housing generation after generation. You only have the to read the other article regarding people relocation where the woman sued two landlords because they would not accept her section 8 housing voucher to realize that this sense of entitlement is out of control. Step up folks andd and be responsible for yourself. Yes, it is hard but we are forming generations who believe they are entitled to benefits without having to change their behavior or change anything. They want but are not willing to sacrifice anything to achieve their goal.

Unlike Uncle Sam I'm financially responsible. I have only two credit cards: my primary is a Visa and backup is an American Express. Both of which I pay off fully every month. I never spend more than I have and I live within my means (all on a five figure salary). And since I don't rely on the government for free handouts the sequester will not affect me financially. As far as longer lines at the airport and whatnot, sounds like a golden opportunity to catch up on some reading.

We all have to pay for what we buy... including our government. So, just how do we do this. That is the question. EVERYONE......do you know the history of U.S. tax rates? I didn't until a few months ago. Go to Wikipedia (that is where the easiest form to follow is). It translates amounts in dollars (with inflation) from years earlier to currant values. The chart is near the bottom of the site so scroll way down. Note the amount the highest incomes (and lower as well) were paying in the 1940's through the 1960's especially, when our economy was growing and people had hope. Personally, I was shocked! However, we did pay for World War II and the interstate highway system (a huge public works project that we have ALL benefited from). Part of our huge debt is due to the 10 year wars in Iraq and Afghanistan which have not been paid for yet. Medicare and Social Security are public services that we will all benefit from sooner of later..............Go Figure.

I am fascinated by Obama and his followers' position that "Congress is not doing its job." My representatives are absolutely doing their job by representing me and NOT GIVING IN. The speakers on today's program kept saying they "could not afford" this and that, and one said she "had to dip into her savings" and "charge groceries." How about moving to a less expensive house, getting a second job, or selling things? Those are other options, too.

Not. Am not feeling any sympathy for US gov't paid (meaning money from me) workers who are just now getting pay cuts.
I work for a private employer (not paid by gov't $$) and I am classified as a full time worker but I can not remember the last time I had a 40 hour work week.
So, finally, come over to my side and suffer with the rest of us!

In Alabama we have had sequestration for years. Here we call it proration. It involves spending only what you take in. Everybody complains, tightens there belt and we get through it. I'm tired of balancing my checkbook and yet the idiots we send to Washington don't have a clue


With Generous Support From...