February 24, 2013 at 22:08 PM EST
the sequester
Thanks! Change ‘stipulated’ to ‘stupulated’… ;) If they only knew ‘the debt’ was just a reserve drain… :( The sequester is a group of cuts to federal spending set to take effect March 1, barring further congressional action. President Obama signs the Budget Control Act into law. (Pete Souza/White House) The sequester was originally passed [...]

Thanks!
Change ‘stipulated’ to ‘stupulated’…
;)

If they only knew ‘the debt’ was just a reserve drain…
:(

The sequester is a group of cuts to federal spending set to take effect March 1, barring further congressional action.

President Obama signs the Budget Control Act into law. (Pete Souza/White House)

The sequester was originally passed as part of the Budget Control Act of 2011 (BCA), better known as the debt ceiling compromise.

It was intended to serve as incentive for the Joint Select Committee on Deficit Reduction (aka the “Supercommittee”) to come to a deal to cut $1.5 trillion over 10 years. If the committee had done so, and Congress had passed it by Dec. 23, 2011, then the sequester would have been averted.

Obviously, that didn’t happen.

A deal was reached to avert the cliff, in which the sequester was delayed to March 1.

The cuts are evenly split between domestic and defense programs, with half affecting defense discretionary spending (weapons purchases, base operations, construction work, etc.) and the rest affecting both mandatory (which generally means regular payouts like Social Security or Medicaid) and discretionary domestic spending. Only a few mandatory programs, like the unemployment trust fund and, most notably, Medicare (more specifically its provider payments) are affected. The bulk of cuts are borne by discretionary spending for either defense or domestic functions.

Food stamps are exempt from the sequester. (For The Washington Post)

Most mandatory programs, like Medicaid and Social Security, and in particular low-income programs like Temporary Assistance for Needy Families (TANF, or welfare) and the Supplemental Nutritional Assistance Program (SNAP, or food stamps) were exempt from the sequester.

The 2013 sequester includes:

  • $42.7 billion in defense cuts (a 7.9 percent cut).
  • $28.7 billion in domestic discretionary cuts (a 5.3 percent cut).
  • $9.9 billion in Medicare cuts (a 2 percent cut).
  • $4 billion in other mandatory cuts (a 5.8 percent cut to nondefense programs, and a 7.8 percent cut to mandatory defense programs).

That makes for a total of $85.4 billion in cuts. Note: numbers here updated to latest CBO figures; thanks to Center for Budget and Policy Priorities for noting the difference from initial OMB numbers.

More will be cut in 2014 and later; from 2014 to 2021, the sequester will cut $87 to $92 billion from the discretionary budget every year, and $109 billion total.

The sequester cuts discretionary spending across-the-board by 9.4 percent for defense and 8.2 percent for everything else. But no programs are actually eliminated. The effect is to reduce the scale and scope of existing programs rather than to zero out any of them.

The National Institutes of Health will see budget cuts in the billions if the sequester goes through. (J. Scott Applewhite/Associated Press)

Here are just a few. Update: Note that these are rough estimates based on numbers put out by OMB before the fiscal cliff deal:

  • Aircraft purchases by the Air Force and Navy are cut by $3.5 billion.
  • Military operations across the services are cut by about $13.5 billion.
  • Military research is cut by $6.3 billion.
  • The National Institutes of Health get cut by $1.6 billion.
  • The Centers for Disease Control and Prevention are cut by about $323 million.
  • Border security is cut by about $581 million.
  • Immigration enforcement is cut by about $323 million.
  • Airport security is cut by about $323 million.
  • Head Start gets cut by $406 million, kicking 70,000 kids out of the program.
  • FEMA’s disaster relief budget is cut by $375 million.
  • Public housing support is cut by about $1.94 billion.
  • The FDA is cut by $206 million.
  • NASA gets cut by $970 million.
  • Special education is cut by $840 million.
  • The Energy Department’s program for securing our nukes is cut by $650 million.
  • The National Science Foundation gets cut by about $388 million.
  • The FBI gets cut by $480 million.
  • The federal prison system gets cut by $355 million.
  • State Department diplomatic functions are cut by $650 million.
  • Global health programs are cut by $433 million; the Millenium Challenge Corp. sees a $46 million cut, and USAID a cut of about $291 million.
  • The Nuclear Regulatory Commission is cut by $55 million.
  • The SEC is cut by $75.6 million.
  • The United States Holocaust Memorial Museum is cut by $2.6 million.
  • The Library of Congress is cut by $31 million.
  • The Patent and Trademark office is cut by $156 million.

While military salaries are exempt from the sequester, benefits like tuition assistance and the TRICARE program (which provides health care to personnel and their families, among others) are not.

The Congressional Research Service has written that a sequester may not “reduce or have the effect of reducing the rate of pay an employee is entitled to” under their federal pay scale. However, the sequester is likely to cause furloughs, which amount to unpaid time off, or, basically, a pay cut.

Stephen Fuller, an economist at the libertarian-minded George Mason University, puts the number at 2.14 million jobs lost. That includes the direct loss of 325,693 jobs from defense cuts (including 48,147 civilian employees at the DoD) and 420,529 jobs from non-defense cuts (including 229,116 federal workers — the rest, by and large, are contractors). The rest of the jobs losses are indirect, resulting in a 1.5 point increase in the unemployment rate. However, Fuller’s estimates predate the delay in the sequester passed in December, and other analysts are more measured. Macroeconomic Advisers estimates the sequester will add only 0.25 points to the unemployment rate, a sixth of the impact Fuller predicts.

The CBO estimates that the combined federal fiscal tightening taking place in 2013 is knocking 1.5 points off GDP growth for the year. Of that, about 5/8 of a percent (or 0.565%) is due to the sequester. Macroeconomic Advisers similarly estimates that the sequester will shave off 0.6 points from the year’s growth rate. George Mason economist Stephen Fuller’s estimates are more dramatic, putting the loss of 2013 GDP at $215 billion, reducing the growth rate of GDP by two thirds. However, Fuller’s estimates precede the shrinking of the sequester.

President Obama has been vague on how he’d replace the sequester. (Pablo Martinez Monsivais/AP)

President Obama has been less specific than his colleagues in Congress on how he wants to see the sequester replaced, but he has suggested that, in lieu of a bigger deficit reduction deal, he wants to see the 2013 sequester replaced with a package of tax increases (including loophole closures and increases on the wealthy) and spending cuts.

Sens. Patty Murray (seated, left) released Senate Democrats’ sequester plan. (Mike Theiler/Reuters)

House Democrats, led by Budget Committee ranking member Chris Van Hollen, proposed replacing the $85 billion in 2013 sequester cuts with a mix of tax increases — including a “Buffett rule”-style minimum tax on income above $1 million and repeal of tax subsidies for oil companies — and spending cuts, notably including a reduction in farm subsidy payments to farmers and an increase in flood insurance premiums.

Most of these policies would be spread over a decade rather than falling entirely in 2013.

Senate Democrats, led by Budget Committee Chairwoman Patty Murray, introduced the American Family Economic Protection Act, which replaces the 2013 sequester with $110 billion in spending cuts and tax increases, spread out over the course of a decade. Like the House plan, these policies include a “Buffett rule,” the closure of tax loopholes for oil companies and cuts to farm subsidies. Additionally, the Senate bill cuts military spending in excess of the sequester’s cuts.

Both the Senate and House Democrats’ plans allow the sequester to take effect at the beginning of 2014.

House Speaker John Boehner, right, has laid out the Republican position on replacing the sequester. (Joshua Roberts/Bloomberg)

As part of John Boehner’s “plan B” approach to avoiding the fiscal cliff (embarked upon after initial talks with the White House broke down), the House on Dec. 20, 2012, passed the Spending Reduction Act of 2012. The plan would have replaced the 2013 defense sequester with a variety of spending cuts, including cuts to food stamps, the Affordable Care Act and Dodd-Frank (including eliminating the “orderly liquidation authority” at the center of the legislation). It would have reduced the size of the domestic sequester in proportion to the $19 billion in discretionary savings included in the bill.

Republicans have conceded that they won’t be able to pass the bill again, even in the House, but it provides a model for what Republicans want in a temporary replacement: no tax increases, no defense cuts and considerable domestic spending reductions.

The AARP (whose activists are pictured here) is among many groups resisting the sequester’s domestic cuts. (Melina Mara/The Washington Post)

Just about every interest group wants to stop the sequester and just about none wants to see it take effect. Aerospace and defense companies, along with universities reliant on defense research funding, have launched Second to None, a coalition battling the defense cuts. A group of almost three thousand organizations, including the NAACP, AARP, Children’s Defense Fund, the Wilderness Society, Greenpeace, Human Rights Campaign, the Innocence Project, and many, many more, have warned about the impact of the non-defense discretionary cuts in the sequester. Physicians and medical research organizations, including the American Medical Association, the American Pediatrics Association and many others, are resisting the discretionary cuts to medical research, and in particular the National Institutes of Health. Liberal groups like MoveOn and the Working Families Party are also getting in on the action.

The Tea Party-affiliated FreedomWorks has put out a letter calling for ObamaCare to be defunded so as to match the expected post-sequester spending level without letting the sequester take effect.

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