Andrew Edwards, Staff Writer
Posted: 09/26/2012 03:04:59 PM PDT
Updated: 09/26/2012 10:11:34 PM PDT

Pick any area of federal policy – national security, health care, education, housing – and expect Washington D.C. to cut spending on it next year.

The prospect of cuts is perhaps not too surprising given the fact the United States faces a $16 trillion national debt. Circumstances may be forcing Americans of all political stripes and economic circumstances to accept some unpleasant combination of paying higher taxes and receiving fewer services from Uncle Sam in 2013.

And huge questions remain on whether reductions will happen in time to prevent the nation’s economy from falling off the “fiscal cliff” of automatic spending cuts and tax hikes.

“The whole thing adds up to a fiscal contraction of $600 billion, or 4 percent of GDP,” UCLA Anderson Forecast senior economist Jerry Nickelsburg said.

As this point, Nickelsburg and his Anderson colleagues acknowledge the risk that Congress will be unable to cobble together a budget, but don’t expect lawmakers to actually let the year end without taking some action to avoid an economic catastrophe.

“The Anderson Forecast view is there will be some compromise made after the election and we won’t, a la `Thelma and Louise,’ go off the fiscal cliff,” Nickelsburg said.

The timeline gives Congress less than two months to reach that compromise. Last Friday, the nation’s lawmakers quit working until the campaign season wraps up.

If they fail, the Congressional Budget Office and others worry the result of automatic cuts and tax hikes will be a new recession.

“I can tell you right now, if these cuts come to pass, you’re looking at a very deep recession,” said Paul Granillo, head of the Inland Empire Economic Partnership, a business advocacy group active in San Bernardino and Riverside counties.

The Los Angeles County Economic Development Corp., another business advocacy group, is likewise worried. They anticipate 225,000 California jobs will be lost if the automatic cuts go through.

The tax increases include the expiration of current payroll and Social Security tax reductions, as well as other cuts approved during the George W. Bush and Obama administrations.

The automatic cuts mean billions in automatic spending reductions across the range of federal activities – $55 billion from defense functions and an equivalent amount from other federal operations, including a cut of roughly $11 billion from Medicare.

The House Armed Services Committee, chaired by Rep. Howard “Buck” McKeon, has warned that the cuts could result in the termination of the F-35 Joint Strike Fighter jet program, the nation’s smallest ground force since 1940 and layoffs and reduced research and development spending for the defense industry.

Another report from the office of Sen. Tom Harkin, D-Iowa, outlines several potential cuts. For example, Los Angeles service providers may lose $1.1 million that would have funded HIV testing and prevention work in Los Angeles.

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