The Affordable Care Act At 3: Big Cost Burden, Big Consumer Impact

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As the Affordable Care Act (ACA) celebrates its third anniversary, the law has already imposed $21 billion in private-sector burdens, $9.8 billion in unfunded state liabilities, and 111 million paperwork burden hours.  When the American Action Forum (AAF) reviewed the law’s regulatory impact last year, the ACA had imposed a combined cost of $12.4 billion and 50 million hours, meaning in the last year the administration has more than doubled the cost of implementation and added 21 million compliance hours.

The macro figures, $30.8 billion in costs and 111 million hours, might give policymakers some concern, but the real impact is how these figures affect the healthcare market, consumers, and small businesses. 

Healthcare Market: Premium Increases

Perhaps the strongest criticism against the law during passage was that it did nothing to bend the healthcare cost curve.  With rising Medicare and Medicaid costs, fixing those programs and finding a way to provide affordable coverage for more Americans remains elusive, especially for the ACA.  On several occasions, the law’s own regulations admit that new regulatory provisions will drive up the cost of health insurance premiums.

In the “Notice of Benefit and Payment Parameters” regulation, the administration conceded that premiums would increase, states would bear unfunded costs, and issuers would pay upfront costs.  The regulation noted, “There are administrative costs to States to set up and administer these programs.  For issuers not receiving payments, any contribution is an additional cost, which an issuer could pass on to beneficiaries through premium increases.  There are also reporting costs for issuers to submit data and financial information.”  In total, the rule imposes more than 1 million paperwork hours, half of a billion dollars in costs, but it declines to quantify the economic impact of higher premium increases.  

Conceding premium costs was not an isolated instance.  For example, the final ACA rule on “Preexisting Condition Exclusions” noted that if HHS failed to grant a waiver, “[T]he restricted annual limit provisions of these interim final regulations would result in a significant decrease in access to benefits or a significant premium increase.”  The final cost of this regulation was somewhat trivial, $4.9 million and 38,000 hours, but again, the administration declined to quantify the potential impact of premium spikes.

Although the administration has admitted some of its rules could increase healthcare costs, AAF performed separate research of the market.  In sum, AAF confirmed what many feared when the President signed the legislation: premiums will increase.  AAF surveyed large health insurers that cover a majority of patients in the U.S.  The survey areas included Atlanta, GA, Austin, TX, Chicago, IL, Phoenix, AZ, and Milwaukee, WI.  The results are sobering: young and healthier individuals, including small employers, can expect a 169 percent premium increase, averaged across the five cities.  Consumers in Milwaukee could experience the greatest sticker shock, with a 190 percent increase in 2014.

Even if these figures are high-end estimates, they confirm previous regulatory presumptions.  All that is left is to review future data to determine how high premium increases might actually go.  Although the administration might try to issue new rules to curtail rising premiums, the layered regulatory apparatus will do little to improve quality and stabilize rising healthcare costs.

Individual Impact

Beyond the political scapegoats in the healthcare debate, large insurance companies, individuals also face strong regulatory headwinds.  Many of the $30 billion in costs will eventually affect individuals, in some form.

For example, pending ACA rules mandating nutrition labeling could drive up food prices.  Although labeling might seem innocuous, even the administration admits there are huge costs, and $0 in quantified benefits from the proposed rule.  The menu labeling proposal conceded, “Prices rise to reflect new costs, but generally not by enough to completely offset them.  If the expense of meeting the proposed requirements cause prices to increase for some or all restaurant and restaurant-type foods offered for sale by covered establishments, then the consumption of these foods will fall, further reducing profits for some, or all, of these establishments.”  This proposal could cost more than $750 million, impose 2.6 million paperwork hours, and cause some businesses to forgo certain consumer products.   

Beyond the indirect costs, there are also more direct regulatory provisions that affect individuals.  The infamous “Tanning Services Excise Tax” is only going to impose 10,000 annual hours of paperwork, according to the White House, but many admit the actual consumer impact will be much greater.  However, like many ACA rules, the administration never placed a cost on the macroeconomic impact of the rule.

Looking past the broad regulatory costs placed on individuals, there are often overlooked paperwork requirements.  At 111.4 million hours, it would take 55,742 employees, working 2,000 hours in a year, to complete the required ACA red tape. 

One rule went so far as to require an accounting of the value of food brought to meetings: “reporting payments or other transfers of value that fall under the ‘food’ nature of payment category is quite complicated, both in terms of calculating the value of the payments and determining who should be reported as having received payments.”  Physicians and businesses would likely agree with that statement, and would probably prefer to avoid the rule’s $1.9 billion in costs and close to 8 million paperwork burden hours.

Small Business Impact

The policy implications of the employer mandate, the 50-employee threshold, and the meager tax credit are well known.  Perhaps less obvious are the numerous occasions when the administration conceded its ACA rules would impose significant costs on small businesses.

Under the Regulatory Flexibility Act, agencies must determine if a regulation would impose a “significant economic impact on a substantial number of small entities” (SISNOSE).  This term is undefined among agencies, but HHS states that if a rule reduces revenue or raises prices by 3 to 5 percent within a five-year period, it imposes a SISNOSE.  Regulations rarely trigger this threshold, but to date, the ACA has implemented 11 regulations that would have a significant economic impact on small businesses. 

ACA Rules Burdening Small Businesses According to HHS

Aggregate Small Business Impact: $1.9 Billion and 11.3 Million Hours

The listed costs of $1.9 billion and 11.3 million hours are as reported by the agencies, taking everything listed in the Federal Register at face value.  However, the reality for millions of affected firms is a regulatory tax of 3 to 5 percent, a tax the administration admits.  These burdens will appear nowhere on CBO’s fiscal tables, but they will undoubtedly affect health insurance coverage, consumer products, and the amount of time Americans spend completing federal paperwork.

Conclusion: Past is Prologue?

After $30 billion in burdens and more than 111 million hours, 2013 is the real race to the finish for the ACA.  As the administration places the finishing touches on regulatory implementation, expect rules to undergo expedient White House review, provide brief comment periods, and contain incomplete benefit-cost analyses.  Currently, there are three ACA rules under review at the White House and the administration still must finalize menu labeling and outpatient drug rules. 

If past is prologue, the 2014 report on ACA burdens will catalogue higher costs, more paperwork, and additional layers of red tape on the U.S. healthcare system.  

[1] According to the rule, “These requirements are exempt from the PRA [Paperwork Reduction Act] in accordance with the provisions of the Affordable Care Act.” 75 Fed. Reg. 72238.

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How Pope Francis Can Impact Economic Policy And Help The Poor

Argentina’s Jose Mario Bergoglio, now Pope Francis, became the new head of the Catholic Church yesterday, assuming the papacy that was vacated by Pope Benedict XVI at the end of February. As a cardinal in Argentina, Bergoglio eschewed excess, living in poverty and often visiting the nation’s slums and other impoverished areas. Francis took his name from St. Francis of Assisi, the most famous Catholic advocate for the poor, and as pope, he will have the chance to continue the Church’s legacy of fighting growing rates of income inequality and defending the poor.

Though Bergoglio took strides to distance himself from liberation theology, which advocates for the reform of capitalist economics in a way that benefits the disadvantaged, while serving in Argentina, he has in the past railed against economic inequality and the lack of focus given to the poor by the world’s economic elites. He has called “extreme poverty and and unjust economic structures that create great inequities” a violation of basic human rights, and he has chastised the wealthy for not “taking into account the poor.” In 2007, he went even farther, decrying the economic inequality that exists around the world:

“We live, apparently, in the most unequal part of the world, which has grown the most yet reduced misery the least. The unjust distribution of goods persists, creating a situation of social sin that cries out to Heaven and limits the possibilities of a fuller life for so many of our brothers.”

Recent popes have made similar declarations. In 2011, with streets around the world filled with protests of economic inequality and austerity that was inflicting even more pain on the poor, Benedict called for more economic equality and sweeping reforms of the global financial system in a way that would lead to the “achievement of a universal common good.” Benedict also called for greater wealth distribution to eliminate world hunger and for the greater protection of labor unions to help workers around the world.

Catholic social teaching, in fact, is rich with doctrine about the importance of defending and helping the poor. Still, the Catholic Church has been criticized for not taking sufficient action on those issues. Benedict, after all, formally censured the largest group of American nuns, who focus primarily on advocating for the poor through health care reform and poverty programs, because he said they were not focusing enough on social issues like abortion and gay marriage.

Francis has a chance to change that, whether by re-upping his anti-austerity messages in Europe, where spending cuts have driven up unemployment and decimated poverty programs, by leading opposition to increased income inequality in the United States, where cuts to poverty programs have helped exacerbate the effects of the recession, or by pushing for reforms to economic and health programs to benefit the poorest citizens of Central and South America, Africa, and Asia.

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Obamacare Tax Increases Will Impact Us All

The trillion dollars in tax increases from the Affordable Care Act have the potential to hinder small business and investment, and further set back a struggling economy.

The Joint Committee on Taxation recently released a 96 page report on the tax provisions associated with Affordable Care Act. The report describes the 21 tax increases included in Obamacare, totaling $1.058 trillion – a steep increase from initial assessment. The summer 2012 estimate is nearly twice the $569 billion estimate produced at the time of the passage of the law in March 2010.

Last summer, the House Ways and Means Committee detailed the breakdown of each tax provision in a chart, which we reproduced here.

March 2010 Estimate, 2010-2019, $US billion

June/July 2012 Re-Estimate, 2013-2022, $US billion

Additional 0.9 percent payroll tax on wages and self-employment income and new 3.8 percent tax on dividends, capital gains, and other investment income for taxpayers earning over $200,000 (singles) / $250,000 (married)

“Cadillac tax” on high-cost plans *

Annual tax on health insurance providers *

Annual tax on drug manufacturers/importers *

2.3 percent excise tax on medical device manufacturers/importers* 

Limit FSAs in cafeteria plans *

Raise 7.5 percent AGI floor on medical expense deduction to 10 percent *

Deny eligibility of “black liquor” for cellulosic biofuel producer credit 

Codify economic substance doctrine

Increase penalty for nonqualified HSA distributions *

Impose limitations on the use of HSAs, FSAs, HRAs, and Archer MSAs to purchase over-the-counter medicines *

Impose fee on insured and self-insured health plans; patient-centered outcomes research trust fund *

Eliminate deduction for expenses allocable to Medicare Part D subsidy

Impose 10 percent tax on tanning services *

Limit deduction for compensation to officers, employees, directors, and service providers of certain health insurance providers

Modify section 833 treatment of certain health organizations

Additional requirements for section 501(c)(3) hospitals

Employer W-2 reporting of value of health benefits

* Provision targets households earning less than $250,000.

** Includes CBO’s $216.0 billion estimate for “Associated Effects of Coverage Provisions on Tax Revenues” and $6.0 billion within CBO’s “Other Revenue Provisions” category that is not otherwise accounted for in the CBO or JCT estimates.

Source: Joint Committee on Taxation Estimates, prepared by Ways and Means Committee Staff

These new taxes will hit small businesses hard. Owners of small businesses will face a tax increase on self-employment income and the employer mandate will pose huge challenges to many small businesses. Businesses that work with small profit margins and have workers with relatively low wages may have to close up shop. Businesses that are able to comply will be forced to reduce worker wages and raise prices on customers.

The cost of compliance is another ding on the budgets of small business, large business, medical providers and individuals. The Obamacare Burden Tracker pegs the total cost of compliance at 127.6 million hours. That’s 127.6 million hours of productive work the U.S. economy loses to complexity. 

Add the complexity and the cost to small businesses to the investment tax increase in the ACA, and the tax provisions in the law could do some real damage to economy. Following the fiscal cliff tax increases and the additional 3.8 percent investment tax from the ACA, the U.S. now has a combined state and federal capital gains rate of 28 percent, up from 19 percent in 2012. High investment tax rates discourages the free flow of capital and damages long-term economic growth.

The economic effects of the increases in investment taxes from the ACA won’t necessarily be felt immediately, but will harm future development. Less capital will lead to less future productivity, which will lead to lower future wages.

But small businesses and individuals will feel the other effects of the tax increases in the ACA much sooner, as businesses learn to comply with the law and all its provisions over the next couple years.

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Weekly Address: Congress Must Compromise to Stop the Impact of the Sequester

The White House

Office of the Press Secretary

Hi, everybody. On Friday, I met with leaders of both parties in Congress to try and find a way forward in light of the severe budget cuts – known in Washington as “the sequester” – that have already started to inflict pain on communities across the country.

These cuts are not smart. They will hurt our economy and cost us jobs. And Congress can turn them off at any time – as soon as both sides are willing to compromise.

As a nation, we’ve already fought back from the worst economic crisis of our lifetimes, and we’ll get through this, too. But at a time when our businesses are finally gaining some traction, hiring new workers, bringing jobs back to America – the last thing Washington should do is to get in their way. That’s what these cuts to education, research, and defense will do. It’s unnecessary. And at a time when too many of our friends and neighbors are still looking for work, it’s inexcusable.

Now, it’s important to understand that, while not everyone will feel the pain of these cuts right away, the pain will be real. Many middle-class families will have their lives disrupted in a significant way.

Beginning this week, businesses that work with the military will have to lay folks off. Communities near military bases will take a serious blow. Hundreds of thousands of Americans who serve their country – Border Patrol agents, FBI agents, civilians who work for the Defense Department – will see their wages cut and their hours reduced.

This will cause a ripple effect across the economy. Businesses will suffer because customers will have less money to spend. The longer these cuts remain in place, the greater the damage. Economists estimate they could eventually cost us more than 750,000 jobs and slow our economy by over one-half of one percent.

Here’s the thing: none of this is necessary. It’s happening because Republicans in Congress chose this outcome over closing a single wasteful tax loophole that helps reduce the deficit. Just this week, they decided that protecting special interest tax breaks for the well-off and well-connected is more important than protecting our military and middle-class families from these cuts.

I still believe we can and must replace these cuts with a balanced approach – one that combines smart spending cuts with entitlement reform and changes to our tax code that make it more fair for families and businesses without raising anyone’s tax rates. That’s how we can reduce our deficit without laying off workers, or forcing parents and students to pay the price. I don’t think that’s too much to ask. It’s the kind of approach I’ve proposed for two years now. A majority of the American people agree with me on this approach – including a majority of Republicans. We just need Republicans in Congress to catch up with their own party and the rest of the country.

Now, I know there are Republicans in Congress who would actually rather see tax loopholes closed than let these cuts go through. And I know there are Democrats who’d rather do smart entitlement reform than let these cuts go through. There’s a caucus of common sense. And I’m going to keep reaching out to them to fix this for good.

Because the American people are weary of perpetual partisanship and brinksmanship. This is America, and in America, we don’t careen from one manufactured crisis to another. We make smart choices. We plan. We prioritize. So I’m going to push through this paralysis and keep fighting for the real challenges facing middle-class families. I’m going to keep pushing for high-quality preschool for every family that wants it, and make sure the minimum wage becomes a wage you can live on. I’m going to keep pushing to fix our immigration system, repair our transportation system, and keep our children safe from gun violence.

That’s the work you elected me to do. That’s what I’m focused on every single day. Thanks.

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Mrs. Obama joins a virtual conversation about Let’s Move!, her initiative to ensure our nation’s kids grow up healthy and reach their full potential.

The Open Government Partnership publishes the text of the President's directive extending whistleblower protections to the intelligence and national security communities, as requested by the community.

The Department of Labor celebrates its centennial anniversary and looks forward to continuing its important work on behalf on America's workers.

view all related blog posts

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Remarks by the President on the Impact of the Sequester - Newport News, VA

The White House

Office of the Press Secretary

Newport News Shipbuilding
Newport News, Virginia

1:23 P.M. EST

THE PRESIDENT:  Hello, Newport News!  (Applause.)  Well, it is good to see all of you here today. 

I want to thank your CEO, Mike Petters, for showing me around.  I usually don’t get a chance to hang out with nuclear submarines, especially submarines that my wife has sponsored.  (Applause.)  So right there, that was worth the trip. 

But most importantly, it’s a great chance to see the incredible men and women who, every single day, are helping to keep America safe and are just the bedrock of this country’s manufacturing base.  Thank you to all of you.  (Applause.)

I want to thank our outstanding Secretary of the Navy, Ray Mabus, who’s here.  (Applause.)  There he is right there -- the good-looking guy over at the end.  (Laughter.)  I want to thank your Mayor, McKinley Price, who served this nation bravely in the U.S. Army.  (Applause.)  I want to thank two outstanding Congressmen who care about this facility, care about Virginia and care about the country -- Congressman Bobby Scott is here -- (applause) -- and Congressman Scott Rigell is here as well.  (Applause.)

Now, the reason I came here today, in addition to seeing just some incredible stuff -- it’s true, every time I come to these places, I don't know how you all do it.  It is just amazing work.  But the main reason I'm here is to call attention to the important work that you’re doing on behalf of the nation’s defense, and to let the American people know that this work, along with hundreds of thousands of jobs, are currently in jeopardy because of politics in Washington. 

In a few days, Congress might allow a series of immediate, painful, arbitrary budget cuts to take place -- known in Washington as the sequester.  Now, that's a pretty bad name -- sequester.  But the effects are even worse than the name.  Instead of cutting out the government spending we don’t need -- wasteful programs that don't work, special interest tax loopholes and tax breaks -- what the sequester does is it uses a meat cleaver approach to gut critical investments in things like education and national security and lifesaving medical research. 

And the impact of this policy won’t be felt overnight, but it will be real.  The sequester will weaken America’s economic recovery.  It will weaken our military readiness.  And it will weaken the basic services that the American people depend on every single day. 

Already, the uncertainty around these cuts is having an effect.  Companies are starting to prepare for layoff notices.  Families are preparing to cut back on expenses.  And the longer these cuts are in place, the greater the damage.

So here at Newport News Shipbuilding, you guys have made an enormous investment, because we've said in order to maintain the finest Navy that the world has ever known we've got to make sure that there is an orderly process whereby we are continually upgrading our ships, building new ships, maintaining our ships properly.  And these are some big ships.  So it’s expensive, and it’s complicated.  And you’ve got 5,000 suppliers all across the country, and you've got to have some certainty and some knowledge about how things are going to proceed over the long term for Mike and others to plan properly.
So you're rightly concerned.  Mike is properly concerned about the impact that these cuts will have on not just this company, but companies and small businesses from all 50 states that supply you with parts and equipment. 

Mike was telling me that you guys have already made a billion dollars’ worth of capital investment.  You've got half a billion dollars in training costs as you recruit and hire new people.  Well, those aren't commitments that you make lightly.  You've got to have the capacity to plan and have some certainty in terms of what it is that we're going to be doing.  And you know that if Congress can’t get together and plan our nation’s finances for the long term, that over time some of your jobs and businesses could be at risk. 

Over at the Norfolk Naval Station, the threat of these cuts has already forced the Navy to cancel the deployment, or delay the repair of certain aircraft carriers.  One that’s currently being built might not get finished.  Another carrier might not get started at all.  And that hurts your bottom line.  That hurts this community.
Because of these automatic cuts, about 90,000 Virginians who work for the Department of Defense would be forced to take unpaid leave from their jobs.  So that’s money out of their pockets, money out of their paychecks.  And then that means there’s going to be a ripple effect on thousands of other jobs and businesses and services throughout the Commonwealth, because if they don’t have money in their pockets or less money in their pockets, that means they're less able to afford to buy goods and services from other businesses.  So it's not just restricted to the defense industry.  

All told, the sequester could cost tens of thousands of jobs right here in Virginia.  But it doesn’t just stop there.  If the sequester goes into effect, more than 2,000 college students would lose their financial aid.  Early education like Head Start and Early Start would be eliminated for nearly 1,000 children, and around 18,000 fewer Virginians would get the skills and training they need to find a job.   

Across the country, these cuts will force federal prosecutors to close cases and potentially let criminals go.  Air traffic controllers and airport security will see cutbacks, and that could cause delays at airports across the country.  Tens of thousands of parents will have to scramble to find child care for their kids.  Hundreds of thousands of Americans will lose access to primary care and preventive care like flu vaccinations and cancer screenings, including more than 3,500 children right here in Virginia. 

So these cuts are wrong.  They’re not smart.  They’re not fair.  They’re a self-inflicted wound that doesn’t have to happen.

Now, the reason that we're even thinking about the sequester is because people are rightly concerned about the deficit and the debt.  But there is a sensible way of doing things and there is a dumb way of doing things.  I mean, think about your own family.  Let's say that suddenly you've got a little less money coming in. Are you going to say, well, we'll cut out college tuition for the kid, we'll stop feeding the little guy over here, we won't pay our car note even though that means we can't get to work -- that’s not what you do, right? 

You step back and you say, what is it that's important -- our child's education, making sure they're healthy, making sure we can get to the job, keeping our house repaired?  And then you say, here are the things that aren't so important and you cut those out.  You prioritize, and you make smart decisions.  Well, we should be doing the same thing.   

Now, I’ve laid out a plan that details how we can pay down our deficit in a way that’s balanced and responsible.  We have the plan right on a website, the White House website.  Everybody can go see it.  It details exactly how we can cut programs that don't work, how we can raise money by closing loopholes that are only serving a few, as opposed to the average American. 

We detailed $930 billion in sensible spending cuts that we’re willing to make and $580 billion in wasteful tax loopholes and deductions that we’re willing to eliminate through tax reform. 

And what I've said is if the Republicans in Congress don’t like every detail of my proposal, which I don't expect them to, I’ve told them my door is open.  I am more than willing to negotiate.  I want to compromise.  There's no reason why we can't come together and find a sensible way to reduce the deficit over the long term without affecting vital services, without hurting families, without impacting outstanding facilities like this one and our national defense.  There's a way of doing this. 

And the fact is there are leaders in both parties throughout this country who want to do the same.  I've got to give Scott Rigell credit.  He is one of your Republican congressmen who’s with us here today -- and that's not always healthy for a Republican, being with me.  But the reason he’s doing it is because he knows it's important to you.  And he’s asked his colleagues in the House to consider closing tax loopholes instead of letting these automatic cuts go through.  He’s concerned about the deficit, and he’s more than prepared to make some really tough cuts, but he wants to do it in a smart way. 

Bobby Scott -- same thing.  Some of the cuts we've proposed, Bobby might not think are perfect, but he knows that we've got to make some tough decisions.  He just wants to make sure that you aren't the ones who are adversely impacted and that we're sharing the sacrifice in bringing down our deficit; we're not just dumping it on a few people and we're not doing it in a dumb way.

Senators like John McCain have made similar statements to what Scott said.  Your Republican Governor along with other governors around the country have said they want Congress to stop the sequester, to stop these cuts.  

But I just have to be honest with you.  There are too many Republicans in Congress right now who refuse to compromise even an inch when it comes to closing tax loopholes and special interest tax breaks.  And that's what's holding things up right now. 

Keep in mind, nobody is asking them to raise income tax rates.  All we’re asking is to consider closing tax loopholes and deductions that the Speaker of the House, John Boehner, said he was willing to do just a few months ago.  He said there were a bunch of loopholes and deductions you could close.  He said you could raise $800 billion, a trillion dollars by closing loopholes. 

Well, we're not even asking for that much.  All we're asking is that they close loopholes for the well-off and the well-connected -- for hedge fund managers, or oil companies, or corporate jet owners who are all doing very well and don’t need these tax loopholes -- so we can avoid laying off workers, or kicking kids off Head Start, or reducing financial aid for college students. 

I don’t think that’s too much to ask.  I do not think that is partisan.  (Applause.)  The majority of the American people agree with me.  The majority of Newport News agrees with me.  We need to get this done.  (Applause.)

But the choice is up to Congress.  Only Congress has the power to pass a law that stops these damaging cuts and replaces them with smart savings and tax reform.  And the second I get that bill on my desk, I will sign it into law.  But I've got to get Congress to pass it. 

None of us will get 100 percent of what we want.  Democrats, they've got to make some tough choices too. Democrats like me, we've said we're prepared to make some tough cuts and reforms, including to programs like Medicare.  But if we're willing to compromise, then Republicans in the House have to compromise as well.  That’s what democracy is about.  That’s what this country needs right now.  (Applause.)  

So let me just make one last point, by the way, for those of you who are following this.  Now, lately, some people have been saying, well, maybe we'll just give the President some flexibility.  He could make the cuts the way he wants and that way it won't be as damaging.  The problem is when you're cutting $85 billion in seven months, which represents over a 10-percent cut in the defense budget in seven months, there's no smart way to do that.  There's no smart way to do that.  You don't want to have to choose between, let's see, do I close funding for the disabled kid, or the poor kid?  Do I close this Navy shipyard or some other one?  When you're doing things in a way that's not smart, you can't gloss over the pain and the impact it's going to have on the economy.  

And the broader point is, Virginia, we can’t just cut our way to prosperity.  We can’t just cut our way to prosperity.  We can't ask seniors and working families like yours to shoulder the entire burden of deficit reduction while asking nothing more from the wealthiest and the most powerful.  We're not going to grow the middle class just by shifting the cost of health care or college onto families that are already struggling, or forcing communities to lay off more teachers or cops or firefighters or shipbuilders, and then folks who are doing really well don’t have to do anything more.  That’s not fair, and it's not good for the economy. 

And the other thing we've got to do is to stop having these crises manufactured every month.  It seems like -- I know you guys must get tired of it.  (Applause.)  Didn’t we just solve this thing?  Now we've got another thing coming up?  (Applause.) I mean, think about if Mike Petters ran his business this way -- once every month or two there would be some crisis, and you wouldn’t be sure whether or not you were working or not.  Even if it got solved eventually or ultimately, it would be pretty discouraging on people.  You would be less productive.  Ships wouldn’t get built as fast.  You would waste money because you don’t know exactly what to expect.  Folks aren't sure, am I showing up to work today, or not? 

If it's not a good way to run a business, it's sure not a good way to run a country.  (Applause.) 

Now, all of you, the American people, you’ve worked too hard for too long rebuilding and digging our way out of the financial crisis back in 2007 and 2008 just to see Congress cause another one.  The greatest nation on Earth can't keep on conducting its business drifting from one crisis to the next. 

We've got to have a plan.  We've got to invest in our common future.  Our true north is a growing economy that creates good middle-class jobs; a country that provides its people with the skills they need to get those jobs and make sure that you're getting paid a decent wage for working hard so you can support your families.  That’s what we should be focused on right now.  Not weakening the economy.  Not laying people off.  (Applause.)

That’s what we should be talking about in Washington.  And if you agree with me, I need you to make sure your voices are heard.  Let your leaders know what you expect of them.  Let them know what you believe.  Let them know that what this country was built on was a sense of obligation to not just each other but to future generations; that we've got to shoulder those obligations as one nation, and as one people. 

I was in a conversation with some of the governors from across the country yesterday and I told them, I said, I've run my last election.  Michelle is very happy about that.  (Laughter.)  I'm not interested in spin; I'm not interested in playing a blame game.  At this point, all I'm interested in is just solving problems.  (Applause.)  All I'm interested in is making sure that when you get up early in the morning, and get to this ship at 5:30 in the morning, that you know if you do a good job and if you work hard and if you're making sure that all the parts to this incredible ship that you're building are where they need to be -- if you're doing what you do, then you can go home feeling satisfied, I did my job, I did my part, I can support my family, I can take pride in what I've done for this country. 

That’s all I want.  I want us to be able to look back five years from now, 10 years from now, and say we took care of our business and we put an end to some of these games that maybe, I guess, are entertaining for some but are hurting too many people. 

But in order for us to make that happen I'm going to need you.  The one thing about being President is, after four years you get pretty humble.  (Laughter.)  You’d think maybe you wouldn't, but actually you become more humble.  You realize what you don't know.  You realize all the mistakes you’ve made.  But you also realize you can't do things by yourself.  That's not how our system works.  You’ve got to have the help and the goodwill of Congress, and what that means is you’ve got to make sure that constituents of members of Congress are putting some pressure on them, making sure they’re doing the right thing, putting an end to some of these political games.

So I need you, Virginia, to keep up the pressure.  I need you to keep up the effort.  I need you to keep up the fight.  (Applause.)  If you do, Congress will listen.  If you stand up and speak out, Congress will listen.  And together, we will unleash our true potential, and we'll remind the world just why it is the United States builds the greatest ships on Earth and is the greatest nation on Earth.  (Applause.)

Thank you.  God bless you.  God bless the United States of America.  (Applause.)

END
1:44 P.M. EST

President Obama is on hand for the unveiling of the new Rosa Parks statue in the U.S. Capitol

February 27, 2013 12:00 PM EST

To mark African American History Month, as well as the 150th anniversary of the year the Emancipation Proclamation, we talked with White House Curator Bill Allman about a painting called Watch Meeting--Dec. 31st 1862--Waiting for the Hour that hangs near the Oval Office in the West Wing.

President Obama strongly believes we need to replace the arbitrary cuts known as the sequester with balanced deficit reduction, and today he was at a shipyard in Newport News, VA to talk about what failing to do so will mean for middle class families.

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Hospices Reveal Obamacare’s Impact

Two hospice care centers are struggling to make ends meet, and Obamacare’s cuts to Medicare are to blame.

Hospices—health care facilities for the terminally ill—along with other Medicare providers are facing Medicare pay cuts. Of the $716 billion in payment reductions, hospice care was hit by a $17 billion payment cut from 2013 to 2022.

Now, contrary to all of the misleading claims, this effect is already beginning.

San Diego Hospice recently laid off 260 workers, closed a 24-bed hospital, and has recently filed for Chapter 11 bankruptcy. San Diego Hospice’s financial condition is attributed mainly to reduced Medicare reimbursement, fewer patients, and a federal audit that hurt the center’s reputation.

Another provider, Delaware Hospice, had to lay off 52 workers, citing lower federal reimbursement as the cause. “The decision,” said CEO Susan Lloyd, “is a direct result of a consequential decline in census and the need to position the organization to meet additional changes and challenges that the hospice industry anticipates with health care reform.”

“There’s a bit of a squeeze going on,” said Theresa M. Forster, vice president for hospice policy and programs at the National Association for Home Care & Hospice. “Hospices have to do more with less, and you can see how that could take its toll over time.”

If other Part A providers (e.g., hospitals, skilled nursing facilities, home health agencies, hospices), like these hospice centers, can’t withstand Obamacare’s $700 billion worth of cuts, how will seniors be able to access these services?

Remember how AARP, the liberals in the media, and the President insisted that Obamacare’s $716 billion in cuts to Medicare were “reforms that won’t touch your guaranteed Medicare benefits. Not by a single dime”?

Heritage had explained that financing Medicare benefits and seniors’ ability to access those benefits are inseparable—you can’t cut payment to services without affecting persons who depend on those services.

Recall that both the actuary of the Centers for Medicare and Medicaid Services and the Medicare trustees projected that Obamacare’s cuts would cause 15 percent of Part A providers to become unprofitable by 2019 and (if the reimbursement rates stay at Obamacare levels) 40 percent by 2050.

This is flawed and counter-productive policy. During tonight’s State of the Union address, it will be interesting to see if the President wants to double down on this approach. There’s a better way: harnessing the forces of competition. That will require serious structural reforms—as outlined in The Heritage Foundation’s Saving the American Dream—not just tightening price controls that put Medicare providers out of business.

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How Health Care Cuts Could Impact Stocks

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Fact Sheet: Examples of How the Sequester Would Impact Middle Class Families, Jobs and Economic Security

The White House

Office of the Press Secretary

Unless Congress acts by March 1st, a series of automatic cuts—called a sequester—that threaten thousands of jobs and the economic security of the middle class will take effect.  There is no question that we need to cut the deficit, but the President believes it should be done in a balanced way that protects investments that the middle class relies on.  Already, the President has worked with Congress to reduce the deficit by more than $2.5 trillion, but there’s more to do.  The President believes we can not only avoid the harmful effects of a sequester but also reduce the deficit by $4 trillion total by cutting even more wasteful spending and eliminating tax loopholes for the wealthy.

Unfortunately, many Republicans in Congress refuse to ask the wealthy to pay a little more by closing tax loopholes so that we can protect investments that are helping grow our economy and keep our country safe.  Our economy is poised to take off but we cannot afford a self-inflicted wound from Washington.  We cannot simply cut our way to prosperity, and if Republicans continue to insist on an unreasonable cuts-only approach, the middle class risks paying the price.  The most damaging effects of a sequester on the middle class are:

• Cuts to education: Our ability to teach our kids the skills they’ll need for the jobs of the future would be put at risk.  70,000 young children would be kicked off Head Start, 10,000 teacher jobs would be put at risk, and funding for up to 7,200 special education teachers, aides, and staff could be cut.

• Cuts to small business: Small businesses create two-thirds of all new jobs in America and instead of helping small businesses expand and hire, the automatic cuts triggered by a sequester would reduce loan guarantees to small businesses by up to $902 million.

• Cuts to food safety: Outbreaks of foodborne illness are a serious threat to families and public health.  If a sequester takes effect, up to 2,100 fewer food inspections could occur, putting families at risk and costing billions in lost food production.

• Cuts to research and innovation: In order to compete for the jobs of the future and to ensure that the next breakthroughs to find cures for critical diseases are developed right here in America, we need to continue to lead the world in research and innovation.  Most Americans with chronic diseases don’t have a day to lose, but under a sequester progress towards cures would be delayed and several thousand researchers could lose their jobs.  Up to 12,000 scientists and students would also be impacted.

• Cuts to mental health: If a sequester takes effect, up to 373,000 seriously mentally ill adults and seriously emotionally disturbed children could go untreated. This would likely lead to increased hospitalizations, involvement in the criminal justice system, and homelessness for these individuals.

The Office of Management and Budget (OMB) now calculates that sequestration will require an annual reduction of roughly 5 percent for nondefense programs and roughly 8 percent for defense programs.  However, given that these cuts must be achieved over only seven months instead of 12, the effective percentage reductions will be approximately 9 percent for nondefense programs and 13 percent for defense programs.  These large and arbitrary cuts will have severe impacts across the government.

More detailed explanations of these cuts as well as additional areas that will be impacted include:

Security and Safety

• FBI and other law enforcement – The FBI and other law enforcement entities would see a reduction in capacity equivalent to more than 1,000 Federal agents.  This loss of agents would significantly impact our ability to combat violent crime, pursue financial crimes, secure our borders, and protect national security.

• U.S. Attorneys – The Department of Justice would prosecute approximately 1,000 fewer criminal cases nationwide, and some civil litigation defending the financial interests of the United States would not be pursued, potentially costing taxpayers billions of dollars.

• Emergency responders – FEMA would need to reduce funding for State and local grants that support firefighter positions and State and local emergency management personnel, hampering our ability to respond to natural disasters like Hurricane Sandy and other emergencies.

Research and Innovation

• NIH research – The National Institutes of Health (NIH) would be forced to delay or halt vital scientific projects and make hundreds of fewer research awards.  Since each research award supports up to seven research positions, several thousand personnel could lose their jobs.  Many projects would be difficult to pursue at reduced levels and would need to be cancelled, putting prior year investments at risk.  These cuts would delay progress on the prevention of debilitating chronic conditions that are costly to society and delay development of more effective treatments for common and rare diseases affecting millions of Americans. 
• NSF research – The National Science Foundation (NSF) would issue nearly 1,000 fewer research grants and awards, impacting an estimated 12,000 scientists and students and curtailing critical scientific research. 

• New drug approvals – The FDA’s Center for Drug Evaluation and Research (CDER) would face delays in translating new science and technology into regulatory policy and decision-making, resulting in delays in new drug approvals.  The FDA would likely also need to reduce operational support for meeting review performance goals, such as the recently negotiated user fee goals on new innovative prescription drugs and medical devices.

Economic Growth

• Small business assistance – Small Business Administration (SBA) loan guarantees would be cut by up to $902 million, constraining financing needed by small businesses to maintain and expand their operations and create jobs.

• Economic development – The Economic Development Administration’s (EDA) ability to leverage private sector resources to support projects that spur local job creation would be restricted, likely resulting in more than 1,000 fewer jobs created than expected and leaving more than $47 million in private sector investment untapped.  

• International trade – The International Trade Administration (ITA) would be forced to reduce its support for America’s exporters, trimming assistance to U.S. businesses looking to increase their exports and expand operations into foreign markets.  In addition, ITA would not be able to place staff in critical international growth markets, where there is a clear business opportunity for many American businesses to increase their sales and create jobs at home. These staff would have been part of a key program working to promote and facilitate global investment in the U.S., supporting thousands of new jobs through Foreign Direct Investment.  

Government Services

• Food safety – The Food and Drug Administration (FDA) could conduct 2,100 fewer inspections at domestic and foreign facilities that manufacture food products while USDA’s Food Safety and Inspection Service (FSIS) may have to furlough all employees for approximately two weeks.   These reductions could increase the number and severity of safety incidents, and the public could suffer more foodborne illness, such as the recent salmonella in peanut butter outbreak and the E. coli illnesses linked to organic spinach, as well as cost the food and agriculture sector millions of dollars in lost production volume. 

• IRS customer service and tax compliance – The cuts to operating expenses and expected furloughs at the IRS would result in the inability of millions of taxpayers to get answers from IRS call centers and taxpayer assistance centers and would significantly delay IRS responses to taxpayer letters.  The IRS would be forced to complete fewer tax return reviews and would experience reduced capacity to detect and prevent fraud, resulting in an inability to collect and protect billions of dollars in revenue annually.  Cuts to the IRS would ultimately cost taxpayers and increase the deficit through lost revenue from recoveries and additional fraud and abuse.

• Native American programs - Tribes would lose almost $130 million in funding from the Department of the Interior.   Reductions would be necessary in many areas including human services, law enforcement, schools, economic development and natural resources. 

• Workplace safety – The Occupational Safety and Health Administration (OSHA) could have to pull its inspectors off the job for some period of time. This would mean roughly 1,200 fewer inspections of the Nation’s most dangerous workplaces, which would leave workers unprotected and could lead to an increase in worker fatality and injury rates.

Education

• Title I education funds – Title I education funds would be eliminated for more than 2,700 schools, cutting support for nearly 1.2 million disadvantaged students.  This funding reduction would put the jobs of approximately 10,000 teachers and aides at risk.  Students would lose access to individual instruction, afterschool programs, and other interventions that help close achievement gaps.

• Special education (IDEA) – Cuts to special education funding would eliminate Federal support for more than 7,200 teachers, aides, and other staff who provide essential instruction and support to preschool and school-aged students with disabilities.

• Head Start – Head Start and Early Head Start services would be eliminated for approximately 70,000 children, reducing access to critical early education.  Community and faith based organizations, small businesses, local governments, and school systems would have to lay off over 14,000 teachers, teacher assistants, and other staff.

Economic Security

• Social Security applicant and beneficiary services – The Social Security Administration (SSA) would be forced to curtail service to the public and reduce program oversight efforts designed to make sure benefits are paid accurately and to the right people.  Potential effects on SSA operations could include a reduction in service hours to the public, the closure of some offices, and a substantial growth in the backlog of Social Security disability claims.

• Senior meals – Federally-assisted programs like Meals on Wheels would be able to serve 4 million fewer meals to seniors.  These meals contribute to the overall health and well-being of participating seniors, including those with chronic illnesses that are affected by diet, such as diabetes and heart disease, and frail seniors who are homebound.  The meals can account for 50 percent or more of daily food for the majority of home delivered participants.

• Nutrition assistance for women, infants and children – Approximately 600,000 women and children would be dropped from the Department of Agriculture’s Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) from March through September.  At least 1,600 State and local jobs could be lost as a result.

• Rental assistance – The Department of Housing and Urban Development’s (HUD) Housing Choice Voucher program, which provides rental assistance to very low-income families, would face a significant reduction in funding, which would place about 125,000 families at immediate risk of losing their permanent housing. 

• Emergency unemployment compensation – People receiving Emergency Unemployment Compensation benefits would see their benefits cut by as much as 9.4 percent.   Affected long-term unemployed individuals would lose an average of more than $400 in benefits that they and their families count on while they search for another job. Smaller unemployment checks will also have a negative impact on the economy as a whole.  Economists have estimated that every dollar in unemployment benefits generates $2 in economic activity.

• Homelessness programs – More than 100,000 formerly homeless people, including veterans, would be removed from their current housing and emergency shelter programs, putting them at risk of returning to the streets.

Public Health

• Mental health and substance abuse services – Cuts to the Mental Health Block Grant program would result in over 373,000 seriously mentally ill adults and seriously emotionally disturbed children not receiving needed mental health services. This cut would likely lead to increased hospitalizations, involvement in the criminal justice system, and homelessness for these individuals.  In addition, close to 8,900 homeless persons with serious mental illness would not get the vital outreach, treatment, housing, and support they need through the Projects for Assistance in Transition from Homelessness (PATH) program.

• AIDS and HIV treatment and prevention – Cuts to the AIDS Drug Assistance Program could result in 7,400 fewer patients having access to life saving HIV medications.  And approximately 424,000 fewer HIV tests could be conducted by Centers for Disease Control (CDC) State grantees, which could result in increased future HIV transmissions, deaths from HIV, and costs in health care.  

• Tribal services – The Indian Health Service and Tribal hospitals and clinics would be forced to provide 3,000 fewer inpatient admissions and 804,000 fewer outpatient visits, undermining needed health care in Tribal communities.

President Obama urges Congress to act to avoid a series of harmful and automatic cuts—called a sequester—from going into effect that would hurt our economy and the middle class and threaten thousands of American jobs.

Here's quick glimpse at what happened this week on WhiteHouse.gov.

Vice President Biden's Chief of Staff Bruce Reed sat down with us to give us a quick update on the work the President and Vice President have been doing since the President released his plan to reduce gun violence.

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Press Gaggle by Press Secretary Jay Carney, Federal Controller of OMB Danny Werfel, and Principal Deputy Director of NEC Jason Furman on the Impact of the Sequester, 02/08/2013

The White House

Office of the Press Secretary

James S. Brady Press Briefing Room

12:40 P.M. EST

MR. CARNEY:  Thank you all for being here.  As I think we advised earlier today for this gaggle, I have with me Danny Werfel, Federal Controller for the Office of Management and Budget; as well as Jason Furman, Principal Deputy Director of the National Economic Council.  They’re here to discuss with you what would be the devastating impacts of the sequester if it is allowed to take effect, if Congress fails to do the responsible thing, which is to give itself the time and space it needs to pursue a broader budget that would achieve deficit reduction in a balanced way. 

So I will turn it over first to Danny Werfel and then to Jason.

MR. WERFEL:  Thank you, Jay.  I know all of you have a paper that was provided that has information on the impacts of the sequester on the domestic side.  I want to take a moment and talk about how the across-the-board cuts under sequestration would operate and why they would be so harmful to our nation. 

I want to emphasize that the administration believes sequestration is bad policy that was never intended to be implemented.  It was intended to drive both Democrats and Republicans in Congress to compromise.  Sequester is a blunt and indiscriminate instrument that poses a serious threat to our national security, domestic priorities, and the economy.  And it does not represent a responsible way to achieve deficit reduction.

As I think you’re all aware, the fiscal cliff deal included a fully paid-for two-month delay in sequestration, pushing the scheduled implementation date back to March 1st, which is now three weeks away.  The deal did lower the amount of the sequester cut for this year to $85 billion, but this is obviously still a very substantial amount.  And we now have a shortened timeframe for achieving the cut -- seven months. 

OMB now calculates that sequestration will require an annual reduction of roughly 5 percent for nondefense programs and roughly 8 percent for defense programs.  However, given that these cuts must be achieved over only a seven-month period instead of a twelve-month period, the effective percentage reductions will be approximately 9 percent for nondefense programs and 13 percent for defense programs.  These are large and arbitrary cuts, and will have severe impacts across government.

On multiple occasions, the President has laid his plan for more than $4 trillion in balanced deficit reduction, and he has demonstrated his strong commitment and willingness to reach agreement on further balanced deficit reduction that avoids sequestration.  If we do not get an agreement to avoid the sequester, as I mentioned earlier, there would be significant and harmful consequences across the spectrum of both domestic and defense priorities.  And from the document that was provided, you can see that the cuts would cause very significant disruptions that would be felt far and wide across the country.

There has been in the public domain a lot of discussion to date about the impact that the sequester would have on the defense realm.  And let me be clear, those impacts would be severe and must not be allowed to occur.  As Secretary Panetta and General Dempsey have both said on numerous occasions, sequestration would create a serious crisis in military readiness and pose the risk of creating a hollow force by undercutting the essential services, equipment, and support our Armed Forces rely on.

But the impacts on our domestic priorities as a nation would be just as severe.  Let me go through some of the examples.  Six hundred thousand women and children would lose vital nutrition assistance.  Not only would this reduce essential benefits that these families depend on, but it could cost at least 1,600 state and local jobs due to reduced federal funding. 

Approximately 70,000 children would lose Head Start and Early Head Start services.  The National Institutes of Health and the National Science Foundation would have to significantly cut back or delay thousands of research grants and awards, setting back progress on research into life-threatening illnesses and costing tens of thousands of jobs for scientists and students. 

The Food and Drug Administration and the Department of Agriculture would have to cut back on food inspections, leaving the country more vulnerable to public health risks due to foodborne illnesses.  The FBI would have to reduce its law enforcement capacity.  FEMA would have to eliminate funding for firefighters and other emergency personnel.  And the Justice Department would have to furlough hundreds of federal prosecutors.

As you can see, in the list that we distributed there are more impacts that I do not cover here.  The list that you have has additional ones, and this is just the tip of the iceberg.  There are many, many other impacts that are not in the document.  The document just represents some of the ones that we’re highlighting.

Across the government we’ll see assistance programs slashed; we’ll see contracts cut; we’ll see employees out of work.  And we’ll have no choice.  The blunt, irresponsible, and severe nature of sequestration means that we can’t plan our way out of these consequences or take steps to soften the blow.

To reiterate, that’s why it is so critical that Congress acts swiftly to avoid these cuts through a balanced approach to further deficit reduction.  Instead of arbitrary, across-the-board cuts, we need to be carefully reducing the deficit in a way that protects the most vulnerable, protects critical priorities, creates jobs, and strengthens the middle class.

Let me turn it over to Jason Furman who is going to talk through some additional issues from his perspective.

MR. FURMAN:  Thank you.  And after the President’s experience with the cameramen Tuesday, I told Jay I’d only come back here if they weren’t here, so thank you for that.  (Laughter.)

I just want to underscore some of Danny’s points and put a tiny bit of broader economic context around it.  Danny went through the programmatic consequences -- what this would mean for education, medical, research, public safety, and a whole range of things.  And those would all be very damaging and very severe. 

The sequester would also have broader and very negative consequences for the economy as a whole.  And private forecasters, the Congressional Budget Office, and others have estimated that if the sequester hit you would lose hundreds of thousands of jobs as a result.  And we got a tiny bit of a preview of what that might look like in the fourth quarter GDP numbers, where GDP contracted because of a large contraction in defense spending that was, at least in part, due just to fears about the sequester before it even started to hit.

That type of contraction in the deficit, a very large and abrupt and immediate and poorly implemented one in 2013, is especially unnecessary because of the trajectory of what's happening to the deficit right now.  We've made enormous progress in bringing the deficit down over the last four years.  We are slated to make a lot of progress to bring the deficit down over the next couple of years.  The big challenge we have is over the medium and long terms.  Let me talk about that first part first, and then about the medium and long term. 

The deficit this year is projected to be about 5 percent of GDP.  It's come down by nearly 5 percentage points in the last four years.  That’s the most rapid pace of deficit reduction the United States has seen since the end of World War II.  The reason we're seeing this is in part due to the recovery of the economy, but also in part because the President has already signed into law $2.5 trillion of deficit reduction, including $1.4 trillion of spending cuts through the continuing resolutions and Budget Control Act, and another $600 billion of revenue from high-income households in the tax agreement and then the associated intrasavings.

So that $2.5 trillion gets you more than halfway to the $4 trillion that you need to stabilize your debt over the long term, and it actually has been sufficient to be bringing your deficit down quite strongly over the short run.

What we do need, though, is a lot more medium- and long-term deficit reduction.  And that’s the second reason why it would be a real shame to just take the attitude that we should just let the sequester hit rather than doing something else; take the attitude that, oh, the sequester is spending cuts, we want spending cuts, let's just do it that way.  That’s not just programmatically damaging for the reasons that Danny outlined, it's not just macroeconomically damaging in terms of costing jobs, it also misses a really huge opportunity for this country -- one that I think Democrats and Republicans should be able to agree is a better approach than this type of blunt, mindless, bad-policy approach.

And that’s an approach that, one, the President came out and reiterated -- in fact, reiterated it twice in his remarks in this briefing room on Tuesday -- and that’s the type of big deal that still remains on the table, from his perspective.  And that’s a big deal that includes health savings that, in the tenth year, would match or exceed the savings in Bowles-Simpson and would grow more quickly over time.  So you would actually have more health savings than in the sequester, more health savings over the long term than in Bowles-Simpson.  That would include tax reform that could do something like on corporate tax rates, bring our rates down a lot and make our country more competitive.  And that's an approach that would also bring us more deficit reduction, amount of deficit reduction sufficient to bring down and ultimately stabilize our debt measured as a share of the economy.

Of course, as the President said, there’s not time to do all of that in the next couple of weeks, first of all.  Second of all, there's been interest on a bipartisan basis in Congress in proceeding through budget resolutions in something more like regular order to bring this all about.  That's a process that takes time. 

So what we're trying to do now is make sure that Congress can buy the time it needs in order to do this entitlement reform, tax reform that's a much better solution to our problems than letting the sequester hit, and doing that in a balanced way with a combination of revenue and spending that would buy you some time on the sequester.  The whole goal of buying that time is not for the sake of buying time; it's for the sake of buying time to do something that's a lot bigger and a lot better than the sequester in terms of entitlement reform, tax reform, stabilizing our deficit and ultimately the goal being creating jobs and economic growth.

MR. CARNEY:  So if we could have questions for these two gentlemen.  And if we have a little time at the back, I'll be here for a few minutes after that.

Questions?  Roger. 

Q    When you just said that you'd like to buy time on the sequester, you're saying postpone March 1st, but substitute what?

MR. FURMAN:  A balanced combination of spending and revenue measures.  We have already had an example of this with the two-month delay that we did as part of the ATRA.  And we're talking about something like that.  I'm not saying another two months.  That's something Congress would need to work out the period.  Congress would need to work out --  

Q    Harry Reid said like three months or something.

MR. FURMAN:  Congress really needs to work out the amount of time.  Congress needs to work out the amount of pay-fors.  Where we're coming from is that we'd want to see -- and I don't think you could pass the Senate without seeing something that has a balance of revenue and spending.  And we had a template for that in the ATRA.  And that's the type of thing we'd like to see going forward.

I don't know the exact amount of time you'd need for a bigger budget agreement.  It doesn't appear that this Congress would be able to do that in the next three weeks, so we certainly need more time than that.

Q    Does the White House have an offer?

MR. FURMAN:  What?

Q    Does the White House have an offer?

MR. FURMAN:  Yes, we have -- the President said that his -- the offers that he made in December remain on the table.  So he has a plan on the table.

Q    The numbers here, do they come from Treasury or OMB?  And how do you know that this sort of dire portrait that you paint of life under sequester will actually happen if the sequester goes through?

MR. WERFEL:  The numbers actually come from the federal agencies that are responsible for carrying out the program.  So HHS, for example, helped analyze the situation and develop a Head Start assessment and so on.  And these are experts, programmatic experts.  They are constantly monitoring the manner in which federal dollars go into the field and how they're impacted, and they're evaluating what a very significant and sudden arbitrary cut would do.  And so we rely on the agencies to provide that expertise.

Q    Could you talk about how this thing would be implemented?  Is it a cliff?  Is it a slope?  Do 800 women lose their nutrition on March 1st?  Or how does it work?

MR. WERFEL:  So from a technical standpoint, what happens is that if we have to issue the sequester order and move into this phase on March 1st, essentially it cancels $85 billion in budgetary resources that agencies previously had available.  So they now have to get to the end of the fiscal year, across government, on a budget that now has $85 billion less than it once did. 

Now, agencies are going to have to carry out and get to the finish line in a way that's most effective to meet their mission.  And so, in some cases, I think you’ll see variation.  In some cases, you’ll see immediate impacts.  And in some cases, agencies will work out those changes to their programs and their structures over time.  So there’s no easy answer to say what the world is going to look like on March 2nd.  We just know that these impacts -- while not all of them immediate -- if we don't take action, they will take place.

Q    Has the administration started to put any contingency plans in place?  And just to go back to the time issue again, is there a minimum length of time the President would accept, a couple of months -- three to six?

MR. FURMAN:  I think on the time we said that's something we want Congress to work out.  And certainly three months [sic] isn’t enough time to come to the type of agreement we’d like to come to.

MR. EARNEST:  Three weeks.

MR. FURMAN:  Three weeks, sorry.  I’m sorry.  I meant three weeks is certainly not enough time.

MR. WERFEL:  And on the contingency plan, remember sequester was scheduled to take place initially in January.  Prior to that, as there was uncertainty around a fiscal cliff deal, OMB was working with federal agencies on their planning activities, and obviously we’ve resumed that in anticipation of March 1st.  So agencies are working through exactly how they are going to execute under this very significant cut in their budgetary resources.  Those planning activities are ongoing.

Q    Have agencies started to issue letters to employees warning of furlough and the like?  Or when will that start happening?

MR. WERFEL:  So what happened as recently as last week is agency heads sent notices out to their broad base of employees kind of updating them on where things are in terms of sequester planning, and did in that message -- many of these agencies sent this type of message -- indicated that, unfortunately, in order to meet these budget cuts, that furloughs in many cases are a likely outcome in order to do this.  Now, that was in a broad way.

Under the law, before an employee can be furloughed, they need a specific notice of their furlough with a specific amount of time.  In most cases, it’s 30 days, but it depends on a lot of different factors.  But as a general rule, a 30-day notice is typically what’s required.

I’m not aware of any specific notices that have been issued.  But if we go past this date, there’s certainly -- there’s no way to implement the sequester without significant furloughs of hundreds of thousands of federal employees.

Q    Do you have any more specific number on that?  How many employees and contract employees would be facing this?

MR. WERFEL:  At this point in time I don’t have a specific estimate.  I just know it’s high; it’s in the hundreds of thousands of employees, but I don’t have a specific estimate. 

Q    And just -- can you give me an understanding of what the sequester -- how much it ties your hands -- I mean, the individual agencies.  Because some might say, well, why do you have to cut these crucial programs; couldn’t you find some ways elsewhere?  But does it really tie your hands as to where you can make those cuts?

MR. WERFEL:  It does. 

Q    And how?

MR. WERFEL:  And if you’ll indulge me to be a little bit technical.  What happens is, OMB, we take this amount, this $85 billion that we have to cut, and we apply it to every account in government.  Every account has to be cut by a certain percentage.  It’s not like the agencies can move money amongst accounts.  But it’s even worse than that.  Even at the subaccount, there’s something called Program, Project and Activity, which exists within each account.  And the way the sequester law is written, is that even -- underneath the account, even at the Program, Project and Activity, they all need to be cut by that same percentage.

So, for example, FAA, they have to cut resources in a way that’s going to impact the air traffic controller workforce.  There’s no way to basically say, well, we’ll move -- we’ll try to take all the cuts in this area, like maintenance or custodial work.  It’s not possible to do that because the law is written with such stricture that the cuts have to be taken at such a granular level.  And that’s why when I say it’s across the board, indiscriminate --

Q    But if Congress can’t agree on substitute cuts, could they pass a provision saying that the agency would have more leeway; you would still need to cut the same percentage from each department or each agency, but you have more leeway and you don’t have to go into -- you don’t have to cut air traffic controllers for God’s sake?  You can cut something else?

MR. WERFEL:  I mean, we’ve looked at this question.  We don’t see a way in which you can cut $85 billion over a seven-month period and not have significantly harmful impacts to our priorities, both domestic and defense.

Q    Three quick questions.  Is there anything on this list you could live with cutting in a deal that would be worked out with Congress, or does everything here have to stay?  Question one.  Jason, for you -- if there is a two- or three-month continuous delay of the sequester, based on what you saw in the fourth quarter, do you believe there is an economic harm just associated with that two- or three-month process?  And lastly, looking at all this, do you regret that this White House suggested this in the first place?

MR. CARNEY:  I’ll take the last one.  (Laughter.)

MR. WERFEL:  I’m not involved in the specific negotiations and I think that’s details that Congress is going to need to be worked out.  I think what we’ve outlined here is impacts are extraordinarily troublesome.  I couldn’t pull one out and say, yes, the defense priorities, the domestic priorities, health, education -- it’s hard for me to isolate one of those and say this is something that we should tolerate.  But, again, that’s not really my decision.  There’ll be -- Congress needs to do its work and then ultimate decisions will be made.  And the President will make a decision on the best interests of the nation.

MR. FURMAN:  Right now, Major, there’s two options on the table.  One is the sequester hits, and the second is there’s a short-term delay of the sequester.  There’s no question that economically that second option, a short-term delay of the sequester, would be far superior to the former.

What would make that option even better is if American people and American businesses really appreciated that the reason you are doing that was in order to build time and space for something that was even better than either of those options, which was more medium- and long-term deficit reduction, reforming our entitlements, reforming our tax code, making ourselves more competitive, and permanently ending this fiscal cliff after fiscal cliff.  There’s no question that that’s better. 

And part of what we’ve tried to convince people is, A, the short term is much better than nothing -- much, much better than nothing; and, B, the short term will be even better if people see it as momentum and movement towards continuing to solve our problems.

MR. CARNEY:  The notion much propounded by the spin doctors on the Republican side that the sequester is somehow something that the White House or the President alone wanted or desired is a fanciful confection.  The fact of the matter is, as I think you all recall in the wake of the passage of the Budget Control Act, it was the Republicans, including the Republican Leader of the House, who celebrated it as getting 98 percent of what they wanted.

The sequester was designed as a means of creating a trigger that would get us out of what was a terrible situation that was already doing enormous harm to our economy, which we now know, and that was the threat of default.  It was designed by Republicans and Democrats to be so onerous that it would never come into place because it would force and compel Congress to do something more responsible, which is reduce the deficit -- not through spending cuts alone -- but reduce the deficit by $1.2 trillion.

Finally, I would note it was certainly our preference, the White House’s preference, the administration’s preference, even in the sequester process, that it would be -- that revenues would be part of sequester -- revenues as well as defense and nondefense cuts.  Republicans adamantly refused to go along with that proposition.  Had they not, we would be in certainly a different situation today than we are now.

So I understand that it’s a convenient bit of spin but it’s also a lot of baloney.  

Q    But does he regret it anyway?  I mean, regardless of whose idea it was, does he now, looking at all of the consequences that are --

MR. CARNEY:  What he regrets is that we ever had a circumstance like this country was forced to contend with in the summer of 2011 that there was a certain amount of enthusiasm even within the Republican Party, especially within the House, for the prospect of the United States defaulting on its obligations for the first time in its history -- an enthusiasm that somehow was linked to a belief that it would help the Republican Party achieve ideological goals that the nation overwhelmingly rejected -- rejected then, rejected last year, rejected in the campaign, rejected at the end of the year when we had our fiscal cliff negotiation, and rejects today.

So that the President regrets.  He could not let the country default for the first time, and thus the sequester and the Budget Control Act and everything associated with it, including the super committee, was born.  The whole point in its design was that it would never come to pass.  If Republicans would go along with the simple proposition that the American people overwhelmingly support -- which is that we need a balanced approach to further deficit reduction -- we would have solved this already.

It has been, I think to their -- it's been their loss, in terms of public opinion, that they've refused to go along with this.  And it has been to the country's detriment, because we keep having to deal with these manufactured crises that are terrible for the economy, that hardly inspire confidence with the American people or globally in our capacity to deal with our fiscal challenges. 

We need to return to normalcy when it comes to how we debate and decide these issues.  That’s why we need to -- failing a big deal now, we need to pass an extension, a short-term buy-down, to allow Congress to do what it seems to be inclined to do, which is to return a semblance of regular order and a budget process that hopefully will result in a final product that reflects the proposition of balance that is supported by the vast majority of the American people, by Republicans and Democrats across the country.  And that’s what the President hopes.

Q    To follow up on a previous question, what’s -- you laid out the two scenarios.  What is your best estimate of the hit to GDP if the sequester takes effect or if there’s that short-term uncertainty?

MR. FURMAN:  We don't have an estimate.  Others, independent forecasters, CBO have done estimates.  And it’s important to put it in context, which is that we did solve the majority of the fiscal cliff at the end of December.  The largest item was what was going to happen on taxes, and then we also dealt with the SGR and unemployment insurance. 

But there’s no question defense spending was the difference between a positive GDP number and a negative GDP number in the fourth quarter.  I’m not saying that it would be the difference between that again in the future, but there’s no question that this would make a big difference and, as I said, hundreds of thousands of jobs and a commensurate amount of GDP would be lost as a result relative to what otherwise would have happened.

Q    Do you agree with CBO’s estimates on the impact of the sequester?

MR. FURMAN:  We don't have a specific opinion on CBO’s, but they're never very far off in terms of something like this.  So maybe they're a little high, maybe a little too low.  Maybe you could argue one way or the other, but certainly, they and other forecasters are in the right ballpark in terms of hundreds of thousands of jobs and a significant impact on the economy.

Q    Why defer to Congress?  I mean, this is almost certainly going to go down to February 28th, and the White House is going to have to engage then.  Why not now try to nip this in the bud and take the uncertainty off the table?

MR. FURMAN:  Jay is welcome to add to this too, but the President is looking for the best way forward.  What we’ve heard from both Democrats and Republicans in Congress is an interest in doing something more like the regular order, something more like the budget process.  And this would buy them time to do precisely what both parties in Congress say is the best way to deal with all of this.

I think if anyone here thought that inviting everyone up here this afternoon and locking them in a room would walk out with an agreement and solve this, of course, people would do whatever course it is.  But I’d say we’ve heard really from both parties that getting back, as I said, something more like regular order is the best way forward.  And the President is just trying to help foster that process which they’ve said is the best way to move this forward.

Q    If you buy several months here and you fail to reach the agreement in that period of time, do you then have an even shorter period of time to implement the same magnitude of cuts?

MR. WERFEL:  Yes.  It would depend on the nature of the deal.  But I would imagine that we would be at a smaller size from the $85 billion and a smaller period of time to implement.  So the notion here is to delay these very severe impacts that I've described, so that you have time to work out a deal that can delay and avoid them more permanently.

Q    But if you don't, you have then an even more serious problem?

MR. WERFEL:  I don't know that you'd know that it's more serious, depending on how the numbers go with the dollar decrease and the months.  But you'd still have a serious issue.

Q    Jason, you talked about replacing the sequester with something bigger and better.  Just to get straight the order of magnitude that you're talking about -- if $4 trillion over 10 years is the goal, $2.5 trillion have been done, does that mean you simply need to replace the $1.2 trillion in the sequester, add a couple of hundred billion more, and you're basically at the goal?

MR. FURMAN:  Yes, that's what the President has said, that ideally what the next phase would be, would be about a trillion and a half.  That includes interest associated with it.  And when you said $1.2 trillion for the sequester, that also -- that number for the sequester is the programmatic cuts plus interest.  And that is the type of magnitude he'd like to do.  But again, it's not just the magnitude.  It's also the timing of it, the balance of it, and the fact that you're accomplishing it with real reforms rather than just crude across the board.

Q    And is it your view that that trillion and a half should be 50/50 revenues and --

MR. FURMAN:  The President just said it should be balanced.  In fact, the final offer he had on the table to Speaker Boehner was one that if you just did -- was 50/50 at the time.  And we've enacted about half of the tax portion of that and almost none of the spending portion of that.  And so on a going forward basis, it would have a different ratio than when he originally proposed it.

Q    Danny, the way the law is written, if there's no deal on March 2nd, do you have to start making cuts right away?  Or can agencies sort of hope there will be a deal and just not -- and just delay making cuts?

MR. WERFEL:  Well, I wouldn't advise that they rely on hope.  (Laughter.)  They need to execute plans that protect their mission.  But as I mentioned, the legal requirement would be that when we get to September 30th, the end of the fiscal year, they will have to across government have spent $85 billion less.  And every agency is going to have to approach that differently. 

And if we have the sequester order, we will be working with agencies to making sure that they're doing prudent things to meet that legal responsibility.  Unfortunately, as outlined, those prudent things will help protect their mission as much as possible.  But ultimately, their mission will be compromised for the reasons which I outlined earlier.

Q    In your view, what sort of impact are we looking at for U.S. government civilian operations overseas, aside from the military?

MR. WERFEL:  Well, I mean, there are -- we can work with the State Department and get you more specific answers as an example.  But there are civilian personnel, both at the Defense Department, at the State Department and other agencies around government that will be impacted.  Because, as I said, unless it's exempted -- and there are certain activities, for example, VA, is explicitly exempted -- unless it's exempted, you're taking a cut in every segment of the organization.  And to the extent the organization has an international presence, then they will be taking cuts in that way, too.

And so I think probably more prudent to defer your question, in terms of more specifics, to an agency like the State Department or the Pentagon so they can give you more color to that. 

Q    To what degree would DOD be able to use transfer authority or reprogrammings to offset sequester and protect key programs and contracts?

MR. WERFEL:  So there is the -- one of the things that we've advised agencies, in terms of taking those prudent steps, is looking at ways in which they can manage through the sequester in the best possible way, again, under the guiding principle of protect mission first.  One of those tools they will have is a reprogram authority, where they can go back to Congress and potentially move money from account to account. 

But we've looked at this very closely, and Secretary Panetta is going to say it much better than I can -- with all the tools that they have, that will not get them in any way, shape or form in a place where they can tolerate the sequester safely.

Q    It won't eliminate sequester, but do you think it will make a big difference in any way?

MR. WERFEL:  No, I do not think it will make a big difference.

Q    I'm just wondering if you've been able to calculate what kind of impact, just on certainty of this, has already had on the business community.

MR. FURMAN:  We don’t have a precise quantification of that.  And I would just give the same example I gave before, which is, I think most of the observers of the first fourth-quarter GDP number thought that one thing that played a role in that was uncertainty about future defense spending levels, which led to some -- appeared to have led to some reduction in defense spending then, which adversely affected GDP.

So we don’t know the magnitude, but we do know the sign.  And the sign is unambiguously negative.

MR. CARNEY:  Last one for these guys.

Q    Should we interpret the President's statement earlier this week where he says that any short-term bill should have revenue attached as a veto threat on a two- or three-month bill that was cuts only?  Because there are a lot of Republicans who think that the White House is effectively bluffing, and if they were presented with a two- or three-month cuts-only bill, that he would sign it.

MR. CARNEY:  I mean, I would just point you to what the President said and what I have said, and that is that balance has to be part of our approach to deficit reduction.  And that applies to a short-term buy-down of the sequester, and it certainly applies to our approach to broader deficit reduction.

The President is extremely serious about this, because the consequences -- I mean, the alternative that you're suggesting and has been floated by Republican leaders is that you would ask the burden of further deficit reduction to be borne solely by seniors through significant proposed cuts in Medicare and Social Security and Medicaid; families who have children with disabilities; middle-class families who depend on other programs, and then say, but we will hold harmless wealthy individuals and corporations who enjoy substantial benefits through loopholes and other special interest aspects of our tax code.

That’s simply unacceptable to this President.  It's unacceptable, overwhelmingly, to the American people.  You would be saying that we can't ask folks who enjoy a benefit in the tax code for their corporate jets to give a little bit, but we should raise the eligibility age Medicare to 67.  That's a tough sell I think for anybody, even in some of the reddest of districts in this country.

Q    But in a two- or three-month bill you could easily --

MR. CARNEY:  Again, the President --

Q    -- put more of the President’s own cuts in a package  --

MR. CARNEY:  If you want to negotiate on behalf of the Congress on this, that would be great.  But the balance is essential.  It is essential because it’s the right way to go economically.  It’s the right way to go for the middle class, and it’s the way this President insists we move forward.

Q    But, Jay, there’s no balance in the sequester -- I mean, there’s no revenue in the sequester.

MR. CARNEY:  Let’s go back -- the mandate from Congress was to reduce the deficit by an additional $1.2 trillion.  There are a lot of folks in the Republican Party, as well as their supporters on op-ed pages, who have translated that to mean spending cuts only.  That is not what the law said.  And the President -- all I’m saying is the President says, and it is his position -- it is a position he held throughout this process -- that balance is how we’re going to approach it.

And at different times -- and their positions as strategy go are ever-changing.  But at different times there have been embraces of, as a matter of general principle, Simpson-Bowles, for example.  But what Republicans never tell you is that they all opposed Simpson-Bowles.  Every Republican on the commission voted against it, including the Chairman of the Budget Committee -- Republican House member rather -- and they would never go along with either the revenues or the defense cuts that were in Simpson-Bowles. 

So the fact of the matter is balance is the absolute right way to do this.  It’s the President’s position, and that's what it’s going to be.

Thanks, guys.  I got about five more minutes.

Q    Can you tell us about the storm -- what the President is doing to debrief --

MR. CARNEY:  Yes, I can give you a little update on the storm.  We’re going to have week ahead later in the day.  I don't have it for you now.  I want to thank Danny and Jason for coming out here.

FEMA is working closely with its partners, including the National Weather Service to monitor the developing winter storm in the Northeast.  FEMA’s regional offices in Boston and New York City are in contact with state emergency management counterparts.  FEMA’s National Watch Center here in Washington continues to monitor the situation and hold regular operational briefings with regional and federal partners as the severe winter weather advances and as impacts are felt throughout -- through the overnight hours into Saturday.

The President will obviously be updated on this regularly.  FEMA liaisons are working directly with our state partners at state emergency operation centers in the Northeast states including Connecticut, Massachusetts, New Hampshire, New Jersey, New York -- both in Albany and New York City -- Rhode Island and Vermont.  These liaisons are in addition to the joint state and federal field office staff who are already in place to support ongoing disaster recovery efforts in Connecticut, New Jersey, New York, Rhode Island and Vermont. 

I can refer you for more information -- at least to the American people in affected areas before and after storms -- to visit www.ready.gov.  But that's our update.

Q    Has the President spoken to any of the governors or state officials in the affected areas?

MR. CARNEY:  I don't have any conversations to read out to you. 

Mark.

Q    Jay, can we expect the sequester to be a large part of the State of the Union address?

MR. CARNEY:  I have no previews to give to you on the State of the Union address.

Q    Ever?  (Laughter.)

MR. CARNEY:  I’ll give you one Wednesday.

Ari.

Q    Can you talk about the decision not to send arms to Syrian rebels?

MR. CARNEY:  What question are you asking?

Q    Why the White House overrode recommendations from others in the administration to arm Syrian rebels.

MR. CARNEY:  Well, I am not going to get into internal deliberations about policy decisions of that nature, but I can tell you that, as the President and his national security team have looked at these issues, we have had to be very careful.  We don’t want any weapons to fall into the wrong hands and potentially further endanger the Syrian people, our ally, Israel, or the United States.  We also need to make sure that any support we are providing actually makes a difference in pressuring Assad. 

I think it’s widely viewed that more weapons in Syria -- that a lack of weapons is not the problem in Syria right now.  Keep in mind that there is no shortage, as I just said, of weapons in Syria.  That’s why we’ve focused our efforts on helping the opposition to become stronger, more cohesive, and more organized. 

Now, as a general principle, this is not the kind of thing around which there is one discussion.  We almost constantly or continually review what we’re doing with regards to Syria and that conversation continues.  But it is, of course, of paramount interest on this matter in particular that we not create a situation where weapons provided by the United States end up in the wrong hands and we thereby accidentally, if you will, create more danger for the United States, for the Syrian people, or for Israel.

Anybody else?  Victoria.

Q    Was the White House surprised that yesterday John Brennan would not say that waterboarding was torture when --

MR. CARNEY:  I thought John Brennan did an excellent job yesterday.  I know that’s how people in this building feel.  He demonstrated the breadth and depth of his experience in the field of intelligence and counterterrorism.  He provided I think what has been called by others one of the most expansive discussions of some of the very serious matters that we have undertaken in our effort to fight al Qaeda.  And I think it was -- the public interest was greatly served by that hearing yesterday.

Q    Were you surprised that he wouldn’t say that waterboarding was torture?

MR. CARNEY:  I think John Brennan answered the questions in depth on a number of subjects, so I would just point you to the answers he gave.

Anybody else?  One more.  Dan Lothian.

Q    Why isn’t the President going to the funeral of the young girl in Chicago that the First Lady is going to?

MR. CARNEY:  I think the First Lady is going to the funeral of a girl who was killed in Chicago.  So are, I believe, a few other officials from the administration.  I think that represents the feeling that the President and the First Lady both have about what happened to her and the tragedy that it represents both in real concrete terms to her family but also symbolically because of the tragedy of gun violence that our country has to deal with all too often.

Thanks, guys.  We’ll have a week ahead for you later this afternoon.

END
1:22 P.M. EST

President Obama urges Congress to act to avoid a series of harmful and automatic cuts—called a sequester—from going into effect that would hurt our economy and the middle class and threaten thousands of American jobs.

Here's quick glimpse at what happened this week on WhiteHouse.gov.

Vice President Biden's Chief of Staff Bruce Reed sat down with us to give us a quick update on the work the President and Vice President have been doing since the President released his plan to reduce gun violence.

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