Photo: White House
As crucial as it is to be clear-eyed about Democratic and Republican ideas for replacing the sequester, it’s more important to have a broad sense for how it will function and what the consequences will be — particularly given how little party leaders are doing to avoid it.If, as many suspect, no deal is reached to avoid it and President Obama orders the sequester next week, the reliability of government services and the broader economic outlook will grow very uncertain.
Unlike the targeted federal spending cuts we’ve seen in recent years, the sequester isn’t designed to reshape federal priorities in democratic ways. Instead, when the sequester order goes out, it will effectively start a countdown clock, which ends at the close of the fiscal year on Sept. 30.
Between March 1 and then, scores of federal agencies will be required to cut a total of $85 billion in total spending by reducing their remaining budgets by up to 13 per cent, according to OMB Federal Controller Danny Werfel. Not only that, but agency heads will have their hands tied when it comes to choosing where to cut.
“What happens is, OMB, we take this amount, this $85 billion that we have to cut and apply it to every account in government,” Werfel told reporters earlier this month at a White House briefing for reporters.
“Every account has to be cut by a certain percentage. It’s not like the agencies can move money amongst accounts. But it’s even worse than that; even at the sub-account, there’s something called Program Project and Activity which exists within each account. And the way the sequester law is written is that even underneath the account — even at the Program Project and Activity — they all need to be cut at that same percentage.”
In other words, bloated programs must be cut as much as lean ones; crucial functions as much as ancillary ones.
Agency heads will have latitude to determine when to begin cutting — and thus furloughing workers, diminishing services, and so forth. But by the end of the year, they must have complied with the sequester’s overall requirements.
If agencies slow-walk their budget cuts, and Congress reaches a lengthy or permanent solution to the sequester quickly, the functional and economic consequences will be fairly small. But the administration isn’t advising agencies to cross their fingers and carry on business as usual.
“I wouldn’t advise that they rely on hope,” Werfel said. “They need to execute plans that protect their mission. But as I mentioned, the legal requirement would be that when we get to September 30th, the end of the fiscal year, they will have to across government have spent $85 billion less. And every agency is going to have to approach that differently.”
Republicans may introduce legislation next week that would provide agency heads flexibility — the power to prioritise essential functions and cut more heavily from others. But this would effectively outsource the creation of a cuts-only sequester replacement plan to the executive branch. And Democrats insist that any plan to replace the sequester include new revenues.
So when the sequester hits, it will likely hit in full.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.