15 Things You Need to Know About the Sequester
Nearly two years in the making, the first $85 billion of automatic budget cuts known as the sequester are about to hit starting Friday, but on Monday, there were no real talks under way to prevent it.
Before you start taking sides in the blame game between Democrats and Republicans, there are a few things you need to know about how the sequester came to be, how it will be implemented, and the choices lawmakers face as they seek to avert it.
1. Republicans are right: The idea originated in the White House in the wake of the failure of “grand bargain” talks between President Barack Obama and Speaker John A. Boehner in 2011, as the potential for a first-ever default on the nation’s obligations loomed. Boehner and House Republicans demanded Obama and Democrats agree to a dollar in spending cuts for every dollar increase in the debt ceiling, and the sequester, combined with other cuts, allowed the White House to get past the 2012 elections and still meet that demand.
2. Democrats are right: Republican leaders signed on to the sequester as the debt limit deadline neared. They were initially enthusiastic about the deal, which cut spending, didn’t include a dime in tax increases and might have prodded Democrats to come to the table on entitlements. But the Budget Control Act itself acknowledged the possibility of tax hikes in a sequester replacement bill, and Obama and Democratic leaders insisted all along that higher taxes on the wealthy would be necessary.
3. Unlike a shutdown, a sequester is more like a government slowdown. Interactions with the federal government that are already a hassle — like getting a passport or a tax refund or going through airport security — will become even more of a hassle.
4. The key date is March 27, not March 1. March 27 is when the continuing resolution keeping the government funded expires. Congress will have to hash out a plan to fund the government by then or else the slowdown would turn into a full-blown shutdown.
5. The choices facing Congress are relatively simple. Republicans could agree to more taxes, but insist they won’t. Democrats and the White House could blink on a cuts-only package but say they won’t. All sides could just call the whole thing off and either punt or ditch the sequester entirely. Or one side or the other could agree to cave, provided they extract something else from the other party. Republicans did just that earlier this year when they passed a debt ceiling hike in return for Senate Democrats’ agreement to pass a law delaying congressional pay unless each chamber produces a budget.
6. The sequester was intended to be so illogical it would prompt Congress to act. It was modeled on a bipartisan budget enforcement measure from the 1980s.
7. Democrats and the White House hoped the inclusion of defense cuts would prod the GOP to eventually embrace tax hikes as part of a broader deal.
8. In November 2011, Obama warned he would veto a bill that would eliminate the sequester without replacing it with “a balanced plan” (Read: Taxes must be included) to reduce the deficit by an equal amount — $1.2 trillion over a decade, including $200 billion in interest savings.
9. The supercommittee created to devise an alternative failed. Republicans offered some revenue provisions but not nearly what Democrats wanted.
10. House Republicans twice passed bills in the last Congress that would push off the sequester by replacing Defense cuts with deeper domestic trims; the bills were DOA in the Senate and would have been veto-bait. Those bills died at the end of the 112th Congress and might have trouble passing in the 113th. Obama’s own budget proposals have gone nowhere. The Senate is set to vote on dueling partisan plans this week — neither of which is expected to pass.
11. Postelection talks between the president and Boehner to reach a broader deal failed; the president played hardball during the 2012 fiscal cliff on tax rate hikes on the rich and pulled back from some entitlement trims he had offered in 2011. Republicans in the end agreed to more than $600 billion in new revenue from the wealthy. But the two sides only managed to delay the sequester for just two months.
12. The fiscal-cliff deal left $85 billion of cuts hitting March 1 through Sept. 30 — half from Defense, half from domestic accounts. Many programs are exempt, including Social Security, Medicaid, uniformed military, veterans benefits and some programs for the poor. Medicare will be limited to a 2 percent cut to providers. Everything else must be cut, program by program, line by line, with no flexibility. Agencies, congressional offices and the president’s own staff will have only seven months to make those cuts to their full-year budgets.
13. After the fiscal-cliff deal, Republicans said they would not offer up any more revenue. Obama wants another $600 billion by limiting deductions for the wealthy and closing loopholes. But after agreeing to the fiscal-cliff deal and punting on the debt ceiling, the GOP has dug in.
14. The effects of the sequester would phase in slowly over the next two months. The law generally requires 30 days notice before furloughs, which will be required of employees across the government — from FBI agents, border security guards and air traffic controllers to an estimated 800,000 civilian Defense Department employees. Other actions, such as hiring freezes and a slowdown in contracting, could happen much more quickly.
15. Agencies have some discretion on when to make the cuts. But delaying cuts upfront means deeper cuts later in the year without a deal.