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Jon Greenberg
By Jon Greenberg August 1, 2013

Reid says sequester has already cost 1.6 million jobs

As discussions over the future of the federal budget grind forward, both Democrats and Republicans talk about replacing the sequester -- across-the-board budget cuts hitting much of the federal government --  with something more targeted.

So far, the two sides have found little common ground. For their part, the Democrats are eager to highlight the harm sequestration causes.

Senate Majority Leader Harry Reid, D-Nev., told reporters this week he was disappointed with what he sees as GOP intransigence.

"Let them do whatever they want to do," Reid said. "Talk to the president. My office is always open. I'm anxious to do anything. The sequestration to this point, we have already lost 1.6 million jobs."

That seemed like a pretty big number for an economy that has added about 1.2 million jobs in the past six months. We emailed Reid’s office to learn the source behind his statement. We did not hear back.

Under the rules of sequestration, the government will cut about $85 billion in spending by the end of this fiscal year. Setting aside long-term consequences to the federal debt, putting money into the economy does create jobs and the reverse is also true - less money leads to fewer jobs in the short run.

We asked Ian Shepherdson, chief economist at Pantheon Macroeconomics, a private research group, what he thought of Reid’s number. His answer was brief.

"I have no way of evaluating this at all, there is no official count of job losses due to the sequester," Shepherdson said.

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Sal Guatieri, vice president at BMO Capital Markets, another economics research group, also said he had no estimate."It is difficult to calculate both the direct and indirect effects," Guatieri said.

Back in February, the nonpartisan Congressional Budget Office estimated that sequestration would reduce the number of jobs by 750,000 by the end of the year.  That is about half the figure Reid used, and in any event, we are not yet at the end of the year. Reid said we have already lost 1.6 million jobs because of sequestration.

The source of Reid’s number seems to be a CBO letter to Rep. Chris Van Hollen, D-Md., who asked what would happen if the sequestration were canceled for the rest of this year and 2014.

The CBO said that would increase spending by $14 billion in 2013 and about $90 billion the next year. According to its model, this would boost employment by anywhere between 300,000 to 1.6 million. That is a forecast for what would happen in the future, 2014, not an estimate of the sequester’s current impact.

While the number of jobs would rise, the letter also cautions that "if the spending reductions under current law were reversed, that policy would lead to greater federal debt, which would eventually reduce the nation’s output and income below what would occur under current law."

Our ruling

Reid said that sequestration has already led to the loss of 1.6 million jobs. There is no official estimate of the current impact of the sequester, and Reid's office provided no proof for the claim. The figure Reid seemed to rely on is a projection of the number of jobs that might be created if Congress put the sequester on hold and spent about $100 billion more than is currently planned. And from that forecast, Reid appears to have used the high end.

We rate the statement False.

Our Sources

Congressional Quarterly, Senate Majority Leader Reid Holds Media Availability - Transcript, July 30, 2013

CBO, Automatic reductions in government spending - aka sequestration, February 28, 2013

CBO, Final sequestration report for fiscal year 2013, March 27, 2013

CBO, Letter to the Honorable Chris Van Hollen, July 25, 2013

Daily Kos, CBO: Sequester will cost up to 1.6 million jobs, July 25, 2013

Bureau of Labor Statistics, One-month net change, June 2013

ProPublica, Everything we know about what’s happened under sequestration, May 7, 2013

Washington Post, Harry Reid’s claim than the sequester ‘has already cut 1.6 million jobs’, August 1, 2013

Wells Fargo, Monthly economic outlook, July 2013

Washington Post, Sequester, to some economists, is no sweat, March 20, 2013

Email interview with Ian Shepherdson,  chief economist, Pantheon Macroeconomics July 31, 2013

Email interview with Sal Guatieri, vice president and senior economist, BMO Capital Markets Economics, July 31, 2013

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Reid says sequester has already cost 1.6 million jobs

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