How spending cuts could impact retailers
By Jay Keller
Spending cuts that went into effect on Friday through budget sequestration will test the U.S. economy and retailers should pay close attention to a few areas in particular.
Changes in funding for food safety, transportation, labor and education pose specific challenges for the retail industry, especially in the areas of jobs, disposable income and economic growth.
Small business owners can still breathe a sigh of relief: Tax credits from the Affordable Care Act’s assistance for small businesses have traditionally been exempted from automatic cuts.
As agency officials continue to work on producing a timeline for when furloughs and layoffs will take place, most sources familiar with the situation say changes would start in April.
The budget sequester will have a long-term impact on economic growth for 2013, according to the Congressional Budget Office, as year-long spending cuts would halt the creation of nearly 750,000 full-time jobs.
The travel industry will face serious challenges as the nation’s busiest airports will likely have fewer air traffic controllers due to Federal Aviation Administration furloughs.
With fewer controllers, airports could be forced to close some runways, causing flight delays and cancellations during peak hours in cities like Chicago, San Francisco and New York.
Midnight shifts at 60 airports would be eliminated in addition to the furloughs. Other workforce reductions by the FAA would close control towers at smaller airports and reduce preventative maintenance of equipment.
At the Food and Drug Administration, one agency who failed to produce a new 2013 budget, furloughs aren’t expected.
What is expected, however, is that at least 2,000 food-safety inspections will not take place since the agency will operate at last year’s spending level.
Most of the impact in the food industry will come later in the year, says FDA Commissioner Margaret Hamburg, but concerns remain that fewer food safety inspections could put consumers at risk.
Federal unemployment benefits would also be cut by nearly 10 percent, Defense Dept. civilians would lose a day of pay each week for several months, job counseling for veterans would end and thousands of Army contract and temp workers would lose their jobs.
The Department of Education warns that student loans are in jeopardy since budget cuts could mean layoffs and workforce reduction for private lenders. College students who receive grants and work-study assignments would also see changes.
Thousands spots in pre-kindergarten Head Start programs would also be cut, at least 10,000 teachers would lose their jobs and spending cuts would eliminate jobs for students with special needs.
Coming this summer, after the filing season ends, would be Internal Revenue Service furloughs that the agency expects to impact the agency’s ability to respond to taxpayer inquiries and reduce the number of tax-return reviews or audits.
The IRS says cutbacks to the agency’s ability to detect and prevent fraud could complicate deficit-reduction efforts and result in billions of dollars in lost revenue to the government.
More Budget Sequester News:
What is Sequestration? A primer on mandated, automatic budget cuts (February 27th, 2013)