Fix The Debt

There’s lots of talk about the sequester as the March 1 deadline for it to take effect nears. As the sequester draws closer, more folks are wondering what it is exactly and how it will affect them.

What’s the Origin of the Sequester?

The sequester (or sequestration) was created by the Budget Control Act of 2011 (BCA), which codified the agreement that ended the debt limit crisis of 2011 and averted a federal government default. The law raised the debt ceiling in exchange for spending caps and mechanisms to achieve further deficit reduction, including the Joint Select Committee on Deficit Reduction (also known as the “Super Committee”) and the sequester. The failure of the Super Committee to agree to any deficit savings triggered the sequester.

What Comprises the Sequester?

Sequestration is composed of annual budget cuts over a ten year period totaling over $1 trillion. The cuts are equally divided between defense and non-defense spending. The sequester was designed to be equally unpalatable to both parties in order to serve as an impetus for both sides to compromise and agree to a more thoughtful approach to reducing the deficit.

The sequester for 2013 will cut $85.3 billion. Federal agencies will have to implement across-the-board cuts, they will not have much flexibility in choosing what gets cut and what doesn’t.

Why Now?

The sequester was originally set to take place on January 1. However, the fiscal cliff deal at the beginning of the year pushed it back two months.

The full force of the sequester will not kick in immediately on March 1. Agencies will be able to put off some of the cuts until later in the year.

What Will It Mean?

Every federal agency will be affected by sequestration cuts. A wide array of services will be affected. A few examples:

• The Obama Administration estimates that some 70,000 children will have to be dropped from the Head Start program.
• Research on cures for cancer and other medical advances will be impacted by cuts to the National Institutes of Health.
• While social programs like Social Security, Medicaid, food stamps and children’s health insurance will not be cut, Medicare will see a 2% reduction in payments to providers and insurers.
• Laying off 15,000 air traffic controllers for more than two weeks will mean more flight delays and cancellations.
• Furloughing food inspectors will make us more susceptible to food-borne illnesses such as Salmonella outbreaks. 

Employees and contractors across the federal government will be furloughed. The Department of Defense alone has about 800,000 civilian employees who will be subject to periods of unpaid leave. While soldiers will not be subject to furloughs, they will still be affected because funding for equipment and services they rely on will be impacted.

State and local governments will also be impacted. Federal funding to states and localities for education, public safety and other areas will be cut, meaning teachers and first responders will be affected.

The sequester will affect the economy as well. Furloughs will negatively affect the purchasing power of federal employees. Companies that do business with the government will be impacted. And investments in areas that can boost the economy, like infrastructure, education and research will also be hit. The Congressional Budget Office predicts slower economic growth in the short term due in part to the abrupt and senseless cuts of the sequester.

Can It Be Avoided?

There is no lack of ideas to replace sequestration. See summaries of some proposals here. Alan Simpson and Erskine Bowles also have a proposal that could replace the sequester with a more comprehensive plan.

It is the usual partisan gridlock that is getting in the way of sensible policy. The optimal approach would be to replace the sequester with a smart, comprehensive, long-term deficit reduction plan that is phased in over time so as to not disrupt the economic recovery. The worst option is waiving or fully repealing the sequester with no other savings or mechanisms for additional savings.

What’s Going to Happen?

We don’t have a crystal ball, but with the deadline fast approaching, the two sides aren’t talking to each other, which isn’t a good sign. It’s possible that the sort of last-minute deal that Washington has excelled in as of late could occur. But it’s also conceivable that the sequester will take effect on March 1. Some lawmakers in both parties are saying that it will take the reality of the sequester cuts and outcry from the public to prompt the other side to compromise.

Another looming deadline could prompt action. The stopgap measure funding the federal government expires on March 27, which means the government will shut down without an agreement on government spending. This could provide another opportunity to negotiate a deal, or at least pass a spending bill giving agencies more flexibility on where the cuts come from.

Plenty more fiscal speed bumps await down the road. Americans are losing patience with policymakers kicking the can. Voters in increasing numbers want action to address the mounting national debt.

Additional Resources

What Does the Sequester Mean? – Washington Post

Sequestration: DC's Weird Idea of Cuts – ABC News

Understanding the Sequester in 4 Great Infographics  - Washington Post

Sequestration: What in the World Is It? – Fiscal Times

Sequester FAQ – Washington Post