by Matthew A. (Matt) Cordell
With all the news about "sequestration" and the "fiscal cliff," there seem to be many misconceptions among the public and even the news media. The following summary explains sequestration, and the laws that govern it, in accessible terms. While there is much, much more that could be written on this topic from legal, policy or political perspectives, many will benefit from this basic explanation.
The Budget Control Act of 2011[i] was an attempt by a prior Congress to force a future (now current) Congress to reduce federal budget deficits. It was struck as a compromise between the President and Congress to permit the United States' debt ceiling to be raised, which was necessary to avoid a default on our sovereign debt at the time. In exchange, the Budget Control Act called for reductions in future government spending. Among other things, the Act created a bipartisan Joint Select Committee on Deficit Reduction, which was required to agree to a plan to reduce the deficit by $1.2 trillion over the coming decade. As an incentive for the Joint Select Committee to reach a compromise, the Budget Control Act created a very unpleasant consequence for failure to reach the deficit reduction goal: sequestration. Sequestration is the term used in the Budget Control Act to describe significant across-the-board cuts to almost all categories of federal spending—both defense and non-defense spending. One reason sequestration is so harmful is that it requires indiscriminate cuts to critically important budget items—not just the pork. Congress never intended sequestration to take effect—it was meant only to be a consequence so untenable that future Congresses would be forced to compromise to avoid it. Unfortunately, the current Congress in engaged in a contest of political brinkmanship that has made sequestration a very real possibility.
Because no deficit reduction plan was enacted that would forestall sequestration, the mandatory cuts were slated to go into effect beginning January 2, 2013.[ii] Congress imposed a stop-gap measure called a Continuing Resolution to keep the federal government running, but that has merely pushed the deadline back to March 1, 2013. If a budget is not approved by that date that achieves the deficit reduction goals of the Budget Control Act, almost $100 billion[iii] will be automatically cut in fiscal year 2013.[iv] Furthermore, the consequences will only get worse in the coming years if the goals are not achieved. Sequestration will expand for fiscal years 2014 through 2021 as a progressively more punitive mechanism to force Congress to get the deficit under control.
The House has passed at least four bills in attempts to stop or limit sequestration.[v] Of those, only the Sequestration Transparency Act ("STA") has been enacted.[vi] The STA required the White House's Office of Management and Budget ("OMB") to provide details regarding how the fiscal year 2013 sequester called for by the Budget Control Act of 2011 would be implemented (the "STA Report").[vii] The STA Report estimates almost 10% cuts in each category of spending for fiscal year 2013.[viii] Despite the mandate that the STA Report be detailed, the OMB's STA Report does not provide much detail regarding the effects of sequestration on specific budget items.
At this point, we do not know how specific accounts or programs would be affected. For example, when testifying before a House Armed Services Committee hearing regarding defense funding, OMB Acting Director Jeffrey Zients confirmed that the sequester cuts will apply at the program-project-activity ("PPA") level as specified in appropriations acts or accompanying reports.[ix] These definitions can change from year to year and differ in specificity between (and in some cases even within) departments. Zients said that "[s]pecific details about percentage reductions and the amount of the reduction by program, project, and activity cannot be known at least until Congress enacts appropriations for fiscal year 2013 and finalizes any legislation affecting mandatory programs, as both types of legislation could affect the allocation of the reduction."[x] Because Congress has not enacted a fiscal year 2013 appropriations bill, and the federal government is currently operating under a Continuing Resolution, we are all still in the dark.
We can expect that cuts to most categories of federal outlays would be delayed for some period until funding begins to run out instead of an immediate, drastic reduction. Dr. George Little, Acting Assistant Secretary of Defense for Public Affairs has explained that, with respect to defense spending, "[n]ot every consequence of sequestration would occur [immediately]…[t]his will be a phased-in approach to dealing with sequestration, if it were to take place." Federal agencies appear to have enough funds to continue to operate for a few months, in many cases, before making severe cuts in spending.
For now, we can all encourage Congress to avert this disaster by agreeing to a responsible, deficit-reducing budget for the remainder of fiscal year 2013.
[i] Available at http://www.gpo.gov/fdsys/pkg/BILLS-112s365enr/pdf/BILLS-112s365enr.pdf. The Act amends the Balanced Budget and Emergency Deficit Control Act of 1985.
[ii] See Budget Control Act of 2011; see also "DOD Transfer Rules May Ease Sequester Pain" by Cameron Leuthy, August 17, 2012. Bloomberg Government. Available through subscription.
[iii] Congressional Budget Office estimate. See "Sequestration Update Report: August 2012" by the Congressional Budget Office, available at http://www.cbo.gov/sites/default/files/cbofiles/attachments/SequestrationUpdate_One-Col.pdf. Some commenters have projected different numbers.
[iv] Note that January 2, 2013 is a quarter of the way into the fiscal year!
[v] They are: (1) H. Con. Res. 112, Official House Republican Budget for FY 2013; (2) H.R. 5652, Sequester Replacement Reconciliation Act of 2012; (3) H.R. 6365, National Security and Job Protection Act of 2012; and (4) H.R. 5872, Sequestration Transparency Act.
[vi] See H.R. 5872, enacted August 7, 2012, available at http://www.govtrack.us/congress/bills/112/hr5872/text or http://www.gpo.gov/fdsys/pkg/BILLS-112hr5872enr.
[vii] See Section 2(a).
[viii] See OMB Sequestration Transparency Act Report for Fiscal Year 2013, issued on September 14, 2012, available at www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/stareport.pdf.
[ix] Transcript of testimony of Dir. Jeffrey Zients on August 1, 2012, available at http://armedservices.house.gov/index.cfm/files/serve?File_id=d4bc5a8a-9b82-432d-9453-f8e3373083a2
[x] Testimony of Jeffrey Zients, available at http://armedservices.house.gov/index.cfm/files/serve?File_id=d4bc5a8a-9b82-432d-9453-f8e3373083a2.