U.S.

August 8, 2012

The nuts and bolts of the sequester

by Donna Cassata
Associated Press

Republicans and Democrats are sounding the alarm: The budget sequester is coming and we have to do everything to stop it.

Defense Secretary Leon Panetta says it will be devastating to the military. Manufacturers say it will mean the loss of tens of thousands of jobs. The White House fears cuts in everything from cancer research to the number of FBI agents.

Some $110 billion in cuts kick in Jan. 2, hitting defense and domestic programs equally hard unless Congress figures out over the next five months a way to avoid the reductions.

“Sequestration is a blunt, indiscriminate instrument designed to force congressional action on achieving a balanced deficit reduction plan,” acting Office of Management and Budget Director Jeff Zients told Congress earlier this month. “It is not the responsible way for our nation to achieve deficit reduction.”

But increasingly bitter partisanship and election-year politics make a solution unlikely before the November elections, leaving the issue to a jam-packed lame-duck session for Congress. And if Mitt Romney wins the presidency and Republicans capture the Senate, members of Congress could decide on a short-term fix and delay action until next year.

Here are key questions and answers about the sequester.

Q: What is sequester?

A: Automatic cuts that are imposed across the board to federal programs, from the Pentagon budget for buying guns, ships and planes to the National Weather Service’s equipment for forecasting hurricanes, tornadoes and other severe weather. It’s part of the drive to cut the deficit.

Q: How deep are the cuts?

A: The reductions total $1.2 trillion over 10 years. The first-year cuts are $110 billion, split evenly from defense and domestic programs, from a budget of $3.8 trillion. Many programs, however, would be exempt from the cuts.

Q: What programs would be spared?

A: Social Security, Medicaid, supplemental security income, refundable tax credits, the children’s health insurance program, the food stamp program and veterans’ benefits. The White House said last week that President Barack Obama would exempt military personnel from the cuts.

Q: What about Medicare?

A: The government-run health care program for seniors would face a 2 percent cut in Medicare payments to providers and insurance plans. That works out to a reduction of $11 billion next year.

Q: Who originally came up with sequester?

A: The process was part of the Balanced Budget and Emergency Deficit Control Act of 1985, which set deficit targets. That law stipulated that if spending exceeded the specified targets, a process known as sequester would go into effect. It’s often referred to as the Gramm-Rudman-Hollings Act named for its Senate sponsors – Phil Gramm, R-Texas; Warren Rudman, R-N.H., and Fritz Hollings, D-S.C.

Q: If sequester is so bad, why would anyone agree to it?

A: It was the default plan when all else failed.

Last August, congressional Republicans demanded spending cuts in response to Obama’s plea to raise the nation’s borrowing authority by $2.1 trillion. As part of the negotiated deal, the two sides agreed on $900 billion in spending cuts and the creation of the Joint Select Committee on Deficit Reduction. The committee was told to come up with $1.2 trillion more in deficit cuts – through additional spending cuts, revenue increases or a combination of both – over a decade. If the bipartisan supercommittee failed, or if Congress rejected the panel’s recommendation, the automatic spending cuts would start Jan. 2, 2013.

The countdown to the sequester began last November when the supercommittee was unable to reach a consensus on a deficit-cutting plan.

Q: Who backed that deal on the sequester?

A: Plenty of members of Congress – Republicans and Democrats, committee chairmen, defense hawks, tea party-freshmen. The House vote was 269-161, with 174 Republicans backing the Budget Control Act of 2011. Supporters included the chairman of the House Armed Services Committee, Rep. Howard “Buck” McKeon, R-Calif., and the head of the Appropriations Committee, Rep. Hal Rogers, R-Ky. The Senate vote was 74-26, with Senate Minority Leader Mitch McConnell, R-Ky., and Sen. John McCain of Arizona, the top Republican on the Armed Services Committee, supporting the legislation.

Obama signed it into law.

Q: What are members of Congress saying now?

A: McKeon says he regrets his vote. In an election-year swipe, Republicans like McCain, Sens. Lindsey Graham of South Carolina and Kelly Ayotte of New Hampshire blame Obama and insist he negotiate with Congress on a new deal to avert the cuts. The three recently traveled to four presidential battleground states – Florida, Virginia, North Carolina and New Hampshire – to warn about the devastating impact of the cuts and increase political pressure against them.

Graham said he also was disappointed in the GOP for allowing it to happen.

“The failure of the supercommittee had to be at least anticipated, and the penalty to put the military at risk, devastating the finest military in our nation’s history, is so out of sync with the party of Ronald Reagan. It’s disturbing,” he said. “We share the blame for this, but at the end of the day we have to fix it.”

Q: What does Obama say?

A: The president, in a speech to the Veterans of Foreign Wars, pointed out that Republicans voted for the cuts. Democrats insist that any deal to avoid the sequester must include tax increases on people with high incomes. Republicans counter that any tax increase in a slow economic recovery would be a mistake.

Q: Are negotiations taking place to avoid the cuts?

A: Small groups of senators, Republicans and Democrats, are trying to come up with an alternative that could be attached to a bill for keeping the government in operating funds through next March. Congress will vote on that spending bill in September. But, because critical players aren’t involved in the negotiations, a September solution is given little chance. Plus, just the threat of sequester provides Obama and Democrats with political leverage in an end-of-the-year fight in December over their effort to raise tax rates on the wealthy.

Q: Is sequester part of the so-called fiscal cliff?

A: Yes. The cliff is the prospect of the Bush-era tax cuts expiring Jan. 1 and the automatic spending cuts occurring at the same time. Most economists fear that a combination of higher income taxes on virtually everyone and a simultaneous big drop in government spending would plunge a still fragile economy back into recession.

Q: If sequester happens, what specific programs would be cut?

A: Obama signed a bill Aug. 7 requiring the White House to report to Congress within 30 days on how it will implement the sequester cuts to defense and domestic programs.

Deputy Defense Secretary Ashton Carter told Congress last week that the Pentagon would try to protect the accounts for the war in Afghanistan as much as possible. However, training could be affected. Some managers would be forced to buy fewer weapons, such as four fewer F-35 aircraft and 12 fewer Stryker vehicles while ship programs might be delayed, Carter said.

Some defense contractors have suggested that layoffs were likely and warning notices could go out 60 days in advance – four days before the election. But Carter pointed out that money already in the pipeline, typical for long-term defense contracts, would not be affected.

Zients said the sequester could mean 100,000 children lose their place in Head Start while food safety and workplace safety inspections are reduced. The National Institutes of Health would have to curtail research, Zients said.




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