November 17, 2012

What is the fiscal cliff? Some say precipice for disaster

Cutbacks to just a few federal programs may turn out to have disproportionate impacts here.

By Kevin Miller
Staff Writer

(Continued from page 1)

Which cuts could hit Maine hardest?

While many federal programs used by Mainers would be affected, cuts to a few programs could have disproportionate impacts here. For instance: an estimated $2.1 billion reduction in funding for Navy shipbuilding and conversion could affect employment at Bath Iron Works, the Portsmouth Naval Shipyard and all of the other businesses that support them. The Low Income Home Energy Assistance Program, or LIHEAP, that provides emergency assistance to Mainers struggling to afford heating oil would take an estimated $285 million hit. And the federal Women, Infants and Children nutritional program for low-income families could lose more than $500 million next year.

Maine has a large population of veterans. Would they be affected?

No, most Department of Veterans Affairs programs and veterans assistances programs are exempted from the cuts.

What would happen if Congress doesn't act?

The Congressional Budget Office predicted the sudden jolt could very well plunge the economy back into a recession, lowering the gross domestic product by 0.5 percent and driving unemployment back above 9 percent. It might only last a year, however.

Another downturn in the U.S. economy would likely be felt in other parts of the world, too, including in financially struggling European countries.

Is there an up-side to the fiscal cliff?

Going over the fiscal cliff would result in the largest, single-year reduction in the federal deficit in more than 40 years, according to the CBO. So some economists have suggested that the temporary economic pain might be worth the long-term fiscal benefits.

Will Congress and the White House act?

Since the election, all sides are indicating a new willingness to compromise. They also continue to insist it is the other side that should make the big concessions that would avoid driving the economy off the cliff.

Washington Bureau Chief Kevin Miller can be contacted at 317-6257 or at:

Twitter: @KevinMillerDC

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