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Will Sequester Cuts Affect Your Industry?

WASHINGTON — On Sunday's television news interviews, Republican leaders said that they would not relent on the sequestration of across the board automatic cuts that kicked in on March 1 as Congress remained deadlocked on budget cut decisions.  Congress mandated the massive cuts in 2011 in the event it couldn't later find a way to reduce the deficit by $4 trillion. The White House says that $2.5 trillion had already been cut before the sequester, leaving $1.5 trillion to be negotiated. That proved to be politically too difficult. The sequester amounts to $85 billion in cuts over the next ten months. If the spending hold is carried out for the next ten years, as they are designed to, it will amount to $1.2 trillion.

On the eve before the across-the-board cuts began, House Speaker John Boehner (R-OH) wrote on his blog, ""It's embarrassing that after 15 months Senate Democrats still haven't passed a single sequester replacement bill. The American people deserve better."

Researchers, economists and trade associations are sounding off on how they think the cuts will or will not affect their industry.

Annika Stennsson, spokesperson for the National Restaurant Association, says it is still too early to tell what impact the sequester might have on restaurant owners. "It's not going to be positive," she says, "but it's likely to differ by geography. As far as government food inspections, that may have a longer term impact on wholesale food prices, but again, we'll have to wait and see to what extent. Indicators so far this year aren't showing much of an impact, though – our monthly Restaurant Performance Index actually showed improvement in January due to increasing operator optimism about future business conditions."

Robert Mandelbaum, information services director for PKF Hospitality Research, says, "We have yet to quantify the impact, but the hotels that rely on government business, are located near a national park, or located in a fly-to destination, are the most vulnerable." He points out that hotel owners may feel some impact from cuts to federal government travel and meetings, and those who postpone their trips because of the increased hassles of longer waiting caused by fewer FAA controllers and TSA security officials.

The economist for the National Federation of Independent Small Business, Bill Dunkelberg, rejects scare tactics from the White House. The small business advocate says the $82 billion in cuts is a small rounding error, drawn from the increase in government spending. Although the cuts will slow the economy some, he thinks it isn't nearly as harmful as the recent 2 percent increase in Social Security taxes. "The cuts will occur from new high levels of spending under President Obama," says Dunkelberg.

Paul Taylor, chief economist for the National Automobile Dealers Association, told USA Today that he expects auto dealers to pick up steam this year. "For 85 percent of the car dealers out there, there will be little or no concern," he said about Friday's government cuts.

President Barack Obama said in a press briefing on Friday, "I do believe that we can and must replace these cuts with a more balanced approach that asks something from everybody: Smart spending cuts; entitlement reform; tax reform that makes the tax code more fair for families and businesses without raising tax rates -- all so that we can responsibly lower the deficit without laying off workers, or forcing parents to scramble for child care, or slashing financial aid for college students."

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Staff reporter for Blue MauMau