Agencies prime for worst-case scenarios as fiscal cliff talks edge toward deadline

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WASHINGTON -- Federal agencies are sharpening their plans for forced spending cuts starting Jan. 2 if the Obama administration and Congress cannot agree on a deficit reduction strategy in the coming days.

Some agencies envision furloughs for federal workers, while others are mapping out how to slow hiring and outside contracting and put programs on hold if the across-the-board reductions known as a sequester kick in, affecting millions of Americans.

With 25 days before $1 trillion in cuts over 10 years are set to start, the White House sent word this week to civilian and defense agencies to prepare for the worst to happen.

But the White House may be leading from behind. For months, some managers have been quietly preparing worst-case plans, having grown painfully familiar with budget uncertainty after a near-government shutdown last year and numerous stopgap budgets.

From the federal courts to the National Park Service, agencies have been sweating the logistics on how to shrink their day-to-day operations.

The court system, which faces a $555 million loss next year under an 8.2 percent cut mandated for civilian agencies, is preparing to close some district courts one day a week, impose employee furloughs of up to four weeks and reduce the hours of security officers who guard courthouses.

The Nuclear Regulatory Commission assured employees in November that no furloughs or layoffs are planned. Instead, to save money, outside contracts would be stretched out or stopped. The National Park Service has slowed some hiring for the tourist season, a strategy that advocates and former park officials said would have to continue in January.

The Defense Department is likely to impose an immediate hiring freeze on its civilian workforce, said a spokeswoman, Army Lt. Col. Elizabeth Robbins. Furloughs, rather than layoffs, would begin within a few weeks, she said.

And unions that represent federal workers are dusting off their manuals on when to call for bargaining with management over unpaid furloughs, which would probably be forced on thousands of employees.

The Office of Management and Budget asked agencies in an internal memo this week for more detailed analysis of their financial operations than was in a 394-page report the White House provided to Congress in September.

That report listed more than 1,200 agencies and federal programs that would lose anywhere from 8.2 percent (domestic) to 9.4 percent (military) of their budgets. About $2.5 billion would be excised from the National Institutes of Health and $555 million from nutrition-aid programs for low-income women, infants and children, for example.

Administration officials called this week's notice "technical" planning given that agencies are living under a temporary budget based on funding at last year's spending levels. They reiterated the White House's optimism that Democrats and Republicans will reach a deal.

"This action should not be read ... as a change in the administration's commitment to reach an agreement and avoid sequestration," said Jay Carney, the White House press secretary. The budget office "is simply ensuring that the administration is prepared" to order the spending cuts.

Under a law Congress passed last year to force its own hand in reducing the deficit, the federal budget would shrink indiscriminately by $108 billion starting in January and continue on that scale for eight years -- divided between civilian and defense agencies.

Economists warn that the cuts could push the country back into recession.

For a moment Friday, it seemed like House Speaker John Boehner, R-Ohio, was open to the idea of higher tax rates on the wealthy as part of a deal to avoid the "fiscal cliff."

But his office later backed off, restating his long-standing opposition to any increase in the top tax rate, illustrating the deep political sensitivity of the topic among Republicans.

President Barack Obama has said any deal to avert the broad tax increases and automatic spending cuts scheduled to take effect next month must include an agreement that the top marginal income tax rate rise from 35 percent.

On Friday, Vice President Joseph Biden said the White House was willing to "negotiate how far up" the rate rises. Without congressional action, it will rise to 39.6 percent in January, as tax cuts enacted under President George W. Bush expire.

Mr. Boehner said Friday he was frustrated by Mr. Obama's unwillingness to make equal concessions on entitlement cuts. He said there had been "no progress," despite a Wednesday phone call between the two.



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