A primer on the sequester
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At the end of the month, the dreaded sequester is set to take effect. Hands up if you know what exactly that means -- and be honest. Don't worry, we're here to set you straight. Read on for answers to some of the most-asked questions about the impending cuts.
What is the sequester?
The sequester is a group of cuts to federal spending set to take effect Friday, barring further congressional action.
Where did it come from?
The sequester was originally passed as part of the Budget Control Act of 2011, or BCA, better known as the debt-ceiling compromise. It was intended to serve as incentive for the Joint Select Committee on Deficit Reduction (also known as 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 the deal by Dec. 23, 2011, the sequester would have been averted. Obviously, that didn't happen.
Wasn't this supposed to happen at New Year's?
Yes. The Budget Control Act originally stipulated that the sequester cuts would take effect at the beginning of 2013. Together with expiration of the George W. Bush tax cuts and the payroll tax cut, this would have amounted to a giant fiscal contraction, almost certainly throwing the United States into another recession. That combination of policies came to be known as the "fiscal cliff." A deal was reached to avert the cliff, in which the sequester was delayed to March 1.
What gets cut?
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, such as Social Security or Medicaid) and discretionary domestic spending. But only a few mandatory programs, such as the unemployment trust fund and, most notably, Medicare (or, more specifically, its provider payments) are affected. The bulk of cuts are borne by discretionary spending for either defense or domestic functions.
What is exempted?
Most mandatory programs, such as Medicaid and Social Security and, in particular, low-income programs including Temporary Assistance for Needy Families (TANF, or welfare) and the Supplemental Nutritional Assistance Program (SNAP, or food stamps) are exempt from the sequester.
How much gets cut?
The 2013 sequester includes:
• $42.7 billion in defense reductions (a 7.9 percent cut)
• $28.7 billion in domestic discretionary reductions (a 5.3 percent cut)
• $9.9 billion in Medicare reductions (a 2 percent cut)
• $4 billion in other mandatory cuts (5.8 percent to nondefense programs, and 7.8 percent to mandatory defense programs)
That makes for a total of $85.4 billion in cuts. (Note: Numbers are updated to the latest Congressional Budget Office figures; thanks to Center for Budget and Policy Priorities for noting their difference from initial Office of Management and Budget numbers.)
More will be cut in 2014 and later; from 2014 to 2021, the sequester will cut $87 billion to $92 billion from the discretionary budget every year, and $109 billion total each year.
Will any programs actually end?
No. 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, not zero out any of them.
What notable programs get cut?
Here are just a few (note that these rough estimates are based on OMB amounts issued before the fiscal cliff deal):
• Military operations across the services are cut by about $13.5 billion.
• Military research is cut by $6.3 billion.
• Aircraft purchases by the Air Force and Navy are cut by $3.5 billion.
• Public housing support is cut by about $1.94 billion.
• The National Institutes of Health get cut by $1.6 billion, and the federal Centers for Disease Control and Prevention are cut by about $323 million.
• NASA gets cut by $970 million.
• Special education programs are cut by $840 million.
• The Energy Department program for securing our nuclear arms is cut by $650 million.
• State Department diplomatic functions are cut by $650 million.
• Border security is cut by about $581 million, immigration enforcement is cut by about $323 million, and airport security is cut by about $323 million.
• The National Science Foundation gets cut by about $388 million.
• The FBI gets cut by $480 million.
Global health programs are cut by $433 million; the Millennium Challenge sees a $46 million cut and USAID a cut of about $291 million.
• Head Start gets cut by $406 million, kicking 70,000 children out of the program.
• FEMA's disaster relief budget is cut by $375 million.
• The federal prison system gets cut by $355 million.
• The Food and Drug Administration is cut by $206 million.
• The Patent and Trademark office is cut by $156 million.
• The Securities Exchange Commission is cut by $75.6 million.
• The Nuclear Regulatory Commission is cut by $55 million.
• The Library of Congress is cut by $31 million.
• The U.S. Holocaust Memorial Museum is cut by $2.6 million.
Will military personnel see their pay or benefits cut?
Pay: no. Benefits: yes. While military salaries are exempt from the sequester, benefits such as tuition assistance and the TRICARE program (providing health care to personnel and their families, among others) are not exempt.
Will federal employee salaries get cut?
Technically, no, but effectively, yes. 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 the federal pay scale. But the sequester is likely to cause furloughs, which amount to unpaid time off or, basically, a pay cut.
How many people will lose jobs?
Depends upon whom you ask. George Mason University economist Stephen Fuller puts the number at 2.14 million. That includes the direct loss of 325,693 jobs from defense cuts (including 48,147 Defense Department civilian employees) and 420,529 jobs from nondefense cuts (including 229,116 federal workers -- the rest, by and large, are contractors). The remainder of the job losses are indirect, resulting in a 1.5-point increase in the unemployment rate. But Mr. Fuller's estimates predate the delay in the sequester passed in December, and other analysts are more measured. Macroeconomic Advisers estimates that the sequester will add only 0.25 points to the unemployment rate, a sixth of the impact that Mr. Fuller predicts.
What will this do to the economy?
The CBO estimates that combined federal fiscal tightening in 2013 will knock 1.5 points off gross domestic product growth for the year. Of that, about five-eighths of a percent (or 0.565 percent) is due to the sequester. Macroeconomic Advisers similarly estimates that the sequester will shave 0.6 points from the year's growth rate. Mr. Fuller's estimates are more dramatic, putting the loss of 2013 GDP at $215 billion, reducing the GDP growth rate by two-thirds. Again, Mr. Fuller's estimates precede the sequester's delay-caused shrinking.
What do outside groups want to do?
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. Almost 3,000 organizations -- including the NAACP, AARP, Children's Defense Fund, the Wilderness Society, Greenpeace, Human Rights Campaign, the Innocence Project and many more -- have warned about the impact of the nondefense discretionary cuts in the sequester. Physicians and medical research organizations -- including the American Medical Association, the American Pediatrics Association and others -- are resisting the discretionary cuts to medical research, and in particular the National Institutes of Health. Liberal groups including 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 the Affordable Care Act to be defunded to match the expected post-sequester spending level without letting the sequester take effect.
First Published February 27, 2013 12:00 am