The Office of Management and Budget has released its Congressionally mandated report under the Sequestration Transparency Act, designed to explain how the Obama Administration would execute the sequester, the automatic cuts to defense and discretionary programs supposed to hit at the end of the year.
The report includes these notable parts:
• The cuts, on a percentage basis, would hit defense slightly more than discretionary spending. The cuts are nominally equal – $54.667 billion a year, every year, for nine years, on both the defense and discretionary side. When you add that all up and include the savings to debt service from these cuts, you get to the $1.2 trillion mandated by the sequester.
However, on the discretionary side, this includes a 2% across-the-board cut to Medicare reimbursement rates which reduces the percentage cut across all the discretionary programs. What you end up with is a flat 9.4% reduction in all defense programs not exempted from the sequester, and an 8.2% reduction in all non-exempt discretionary programs (most poverty-related programs are exempt). There are also 7.6% cuts to certain non-defense mandatory programs and a 10% cut to certain mandatory defense programs.
• This is automatic. OMB by and large has no control over the cuts. They write, “The percentage cuts in this report, and the identification of exempt and non-exempt accounts, reﬂect the requirements of the laws that the Administration is applying. With the single exception of military personnel accounts, the Administration cannot choose which programs to exempt, or what percentage cuts to apply. These matters are dictated by a detailed statutory scheme.”
Most of the report’s 394 pages detail precisely how much would come out of what account in 2013. The inauguration committee loses $1 million. The Office of the Attending Physician gets docked $3 million. The Corporation for Public Broadcasting loses $445 million. The Election Assistance Commission is down $9 million. The US Coast Guard loses almost $600 million in its defense functions. I could go on. This is all very routinized; either 8.2% or 9.4% of the budget of these line items vanishes.
• The Administration doesn’t support this. This document was basically designed so Republicans can go around the country talking about “Obama’s job-killing cuts,” particularly to defense. But Republicans voted for the Budget Control Act that put the sequester into play and they did not come to an agreement to avoid the sequester. The OMB document makes this clear. “In August 2011, bipartisan majorities in both the House and Senate voted for the threat of sequestration as a mechanism to force Congress to act on further deficit reduction,” they write. “The specter of harmful across-the-board cuts to defense and nondefense programs was intended to drive both sides to compromise. The sequestration itself was never intended to be implemented. The Administration strongly believes that sequestration is bad policy, and that Congress can and should take action to avoid it by passing a comprehensive and balanced deficit reduction package.”
So the Administration continues to try to use the sequester as a forcing event for the long-sought grand bargain. They aren’t likely to get that right away or even in the lame duck session; the best possibility is a punt, where about 6 months’ worth of the sequester gets voided, pushing talks into next June.
• The Administration’s ask. Specifically, OMB writes that “Members of Congress should work together to produce a balanced plan that achieves at least the level of deficit reduction agreed to in the BCA that the President can sign to avoid sequestration.” Obviously this is only a sequestration document. But this suggests that the Administration may be happy with just a $1.2 trillion “grand bargain” as opposed to a larger one. And this is where the Bush tax cuts come into play. Letting the tax cuts expire above $250,000 a year generates about $950 billion over ten years. That could be applied to the sequester, and it would eliminate almost all of it. This is Nancy Pelosi’s preferred course of action. Indeed, the Administration backs this up by saying “the President’s proposals would ensure that deficit reduction is achieved in a way that asks the top two percent of Americans to shoulder their fair share of the burden.” So as they have been saying for a while, without some high-end tax hikes, there won’t be any deficit reduction plan.
• This is on top of planned cuts. As OMB points out, “The BCA (Budget Control Act) has already locked in almost $1 trillion of discretionary spending reductions over 10 years, bringing nonsecurity discretionary spending down to the lowest level as a share of the economy since the Eisenhower Administration.” They don’t go on to say that’s a pretty terrible idea, so I’ll do it for them.
• Sequestration is a terrible idea. Just some of the preliminary numbers I noted should be enough evidence of this. As OMB writes, “the report leaves no question that the sequestration would be deeply destructive to national security, domestic investments, and core government functions.” While for the most part, normal operations have continued, some of these destructive effects have already begun on items in the budget that spend out in the current year. The sequester has disrupted planning for the next fiscal year and already caused layoffs and cutbacks. OMB intimates that the Pentagon could shift funds to “ensure war fighting and critical military readiness capabilities,” but it leaves no doubt as to the harm on the discretionary side of the ledger.
Education grants to States and local school districts supporting smaller classes, afterschool programs, and children with disabilities would suffer. The number of Federal Bureau of Investigation agents, Customs and Border Patrol agents, correctional ofﬁcers, and federal prosecutors would be slashed. The Federal Aviation Administration’s ability to oversee and manage the Nation’s airspace and air trafﬁc control would be reduced. The Department of Agriculture’s efforts to inspect food processing plants and prevent foodborne illnesses would be curtailed. The Environmental Protection Agency’s ability to protect the water we drink and the air we breathe would be degraded. The National Institutes of Health would have to halt or curtail scientiﬁc research, including needed research into cancer and childhood diseases. The Federal Emergency Management Agency’s ability to respond to incidents of terrorism and other catastrophic events would be undermined. And critical housing programs and food assistance for low-income families would be cut.
And that’s with anti-poverty programs exempted. “The Administration does not support these cuts, but unless Congress acts responsibly, there will be no choice but to implement them,” OMB concludes.