Hard Budget Realities as Agencies Prepare to Detail Reductions

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WASHINGTON -- In the first week of March, a laid-off person living on $300 a week in unemployment benefits is liable to find a surprise in the mailbox: notification from Uncle Sam that come April the check will be $33 lighter.

"Sequestration," that arcane budget term consuming Washington in recent weeks, is about to move from political abstraction to objective reality for tens of millions of Americans. Barring an extremely unlikely last-minute deal, about $85 billion is set to be cut from military, domestic and certain health care programs beginning Friday.

Much of the government will be immune, only magnifying the cuts for the rest. If they are not reversed, federal spending at the discretion of Congress will eventually fall to a new five-decade low. Cuts of even larger size are scheduled to take effect every year over the next 10, signaling an era of government austerity.

By the end of this week, federal agencies will notify governors, private contractors, grant recipients and other stakeholders of the dollars they would be about to lose. As of March 1, the Treasury Department will immediately trim subsidies for clean energy projects, school construction, state and local infrastructure projects and some small-business health insurance subsidies.

Nearly two million people who have been out of work for more than six months could see unemployment payments drop by 11 percent in checks that arrive in late March or the first days of April, according to the White House budget office, an average of $132 a month. Doctors who treat Medicare patients will see cuts to their reimbursements.

If the stalemate in Washington continues, furloughs and layoffs will probably begin in April, starting largely in the 800,000-member civilian work force of the Defense Department and then rippling across the country, from meat inspectors in Iowa to teachers in rural New Mexico.

"If they hit me with a $3 million cut in March, I'm not sure what I'm going to do," said Raymond R. Arsenault, the superintendent of the Gallup-McKinley County Schools, a district that serves primarily Navajo students on the Arizona-New Mexico border.

Mr. Arsenault's school system would be hit much harder than most because 35 percent of his $100 million annual budget comes from federal education "impact aid" to offset the large tracts of land that are owned by Washington and therefore not subject to taxation. Of that, $3 million may be about to disappear.

The sequester involves trimming $85 billion from a $3.6 trillion annual federal budget, or about 2.4 percent. But the cuts will not affect Social Security or Medicaid, and the Medicare cuts total only about $11 billion in the 2013 fiscal year, which ends Sept. 30, according to calculations by the Bipartisan Policy Center.

Thus, entitlement spending, which poses the biggest long-term challenge to the federal budget, accounts for only a sliver of the cuts. That leaves more than $70 billion in cuts to be applied over the next seven months to the roughly two-fifths of the budget that is devoted to discretionary spending, including the military, education and dozens of other categories.

In a matter of weeks the cuts would cascade through the government, delaying snow removal on the Tioga Pass in Yosemite National Park, for example, and keeping an aircraft carrier battle group docked in Norfolk, Va., rather than steaming through the Persian Gulf.

"The cut is so big and over such a short period of time that there's no way to avoid all the operational and program harms," said Daniel I. Werfel, controller of the White House budget office.

These cuts would probably not be confined to 2013. Even if President Obama manages to persuade Congress to raise new revenue, he has said he would replace only half of the spending cuts with tax increases, in essence accepting a half-trillion dollars in cuts over 10 years. That would be on top of more than $1 trillion in cuts already enacted by the Budget Control Act, which created the sequester in 2011 as part of a deal to raise the country's statutory borrowing limit.

A comprehensive deficit-reduction deal, which is currently moribund but is still both Congress and the White House's stated goal, might mitigate the impact by including fast-growing programs like Medicare and Medicaid in the cuts. But belt-tightening, for now, appears to be the new normal.

In private, Capitol Hill staff members and members of Congress have admitted that there are no viable plans on the horizon to delay or offset the cuts. At best, Congress might be able to pass a bill giving agencies more discretion in carrying out the budget cuts. But that is opposed by the White House because officials fear that such a change would give lawmakers a false sense that they had done much to ease the pain of the cuts, when in fact, budget officials say, little would have changed.

That means that as of Friday, dozens of federal agencies must start bringing their budgets down to reduced levels by the end of the fiscal year. Given how much they have to cut, White House budget officials said, they will have no choice but to start the reductions immediately.

The worst hit by far would be the Defense Department, which is already absorbing a $500 billion budget cut over 10 years agreed to in 2011 and is operating under a temporary spending agreement even as it draws down the war in Afghanistan. Military personnel are exempted from furloughs, but civilian personnel are not, so the Pentagon is preparing to put hundreds of thousands of civilian workers on notice that they might lose 22 days of work this year.

"We have long argued that the responsible way to implement reductions in defense spending is to formulate a strategy first and then develop a budget that supports the strategy," Ashton B. Carter, the deputy secretary of defense, told Congress this month. Sequestration "would achieve precisely the opposite effect by imposing arbitrary budget cuts that then drive changes in national security strategy."

Throughout the government, the cuts would hit certain programs particularly hard without touching others. The National Institutes of Health, for instance, would need to cut about 5 percent of its annual budget in just seven months, meaning hundreds fewer research grants, said Kathleen Sebelius, the health secretary. Money for food safety inspection and air traffic controllers would also be cut.

Roughly 600,000 low-income women and children would stop receiving food aid. The Interior Department would issue 300 fewer leases for oil and gas production in Western states. NASA plans to cancel six technology development projects, including deep-space communications. National parks would close or curtail operations in their visitor centers, affecting hundreds of thousands of travelers.

The transportation secretary, Ray LaHood, said on Friday that flights to major cities like New York and Chicago could be delayed by as much as 90 minutes during peak travel periods because fewer air traffic controllers would be on the job.

Most Education Department programs are already fully financed for the current school year, so the big cuts would not occur until next September. But "impact aid," which goes to school districts like Mr. Arsenault's with untaxed federal lands, is paid during the school year and will be affected immediately.

Budget experts said the dollar amount of the cuts might not be devastating to government operations or to the economy, particularly if agencies had discretion in how they carried them out.

"Can we survive this? Of course we can. It's a $16 trillion economy," said Douglas Holtz-Eakin, a former director of the Congressional Budget Office. "Cutting wisely, not stupidly, is a good idea. We've got what everybody thinks is a stupid way to cut."

In some cases, small cuts can take big tolls. Because meat and poultry plants cannot operate without federal inspectors on site at all times, one furloughed inspector would shut down an entire plant. Agriculture Secretary Tom Vilsack estimated that the cuts would mean 15 unpaid stay-at-home days for every employee of the Food Safety and Inspection Service, cutting meat and poultry production by five billion pounds, costing the industry more than $10 billion and cutting worker wages by $400 million.

Alarmed, J. Patrick Boyle, the president of the American Meat Institute, sent a letter on Feb. 11 to Mr. Obama asserting that keeping inspectors home would violate federal law. "I respectfully request that, in the event of sequestration, U.S.D.A. meat and poultry inspectors not be furloughed so that the secretary of agriculture can fulfill his statutory obligations," he wrote.

But the request, Mr. Vilsack replied, would run counter to the legal requirement he faces under sequestration.

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This article originally appeared in The New York Times.


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