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Everything you need to know about budget 'sequestration' – except the consequences

The White House has reported on the $1.2 trillion in automatic budget cuts that are part of last year's debt ceiling deal. But how the cuts will impact individual programs remains unclear.

By Staff writer / September 15, 2012

A Stop Sequestration button that was given to Aerospace employees from Pratt & Whitney and Sikorsky is seen at a rally to call to attention upcoming defense budget cuts, in West Palm Beach, Florida August 8, 2012.

Robert Sullivan/REUTERS



You can now go line by line in the federal budget and see just how deep the spending cuts slated for January will go thanks to a White House report released Friday on the impact of what’s known as “sequestration.”

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What still isn’t there, however, is how the Selective Service (down 9.4 percent, or $2 million), managers for federal emergency food and shelter funding (down 8.2 percent, or $10 million) or operations and maintenance at the Marine Corps (down 9.4 percent, or $854 million) will actually cope with the reductions. 
How many fewer tents will the Federal Emergency Management Agency buy? How will the Marine Corps maintain its combat readiness? That’s all still unclear. 
“There will be some unintended consequences sooner or later,” says Pete Davis of Davis Capital Investment Ideas. “They’ve taken 8.2 percent out of embassy security which doesn’t seem like such a great idea right now…. What are you going to do if you’re building a ship and you’re going to take 9.4 percent out of it? It’s not like you can just buy 90 percent of a ship.”

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Sequestration was the result of last summer’s debt ceiling deal, which cut $1 trillion in government spending over the next decade outright and then put responsibility for finding another $1.2 trillion on Congress.

Because Congress failed to agree on the mixture of lower spending and higher taxes to hit that figure, a mechanism in the debt ceiling-raising legislation causes automatic spending decreases to hit the $1.2 trillion figure: about $109 billion in lower government spending every year for the next decade.
The report itself comes about a week after the statutory deadline from the Sequestration Transparency Act, one of the last pieces of legislation Congress passed before adjourning for its August break. That legislation ordered the administration to create a report detailing the outlines of the sequester. 
Overall, the White House’s Office of Management and Budget outlined the $109 billion in spending cuts for 2013 as follows:
• Hits to defense programs of either 9.4 percent or 10 percent, depending on how they receive their appropriations from Congress ($55 billion).

• Payments to Medicare providers will be reduced by 2 percent ($11 billion).

• Cuts to non-defense spending (like elementary and secondary education or rehabilitation services and disability research) will be cut at either 8.2 percent or 7.6 percent (totaling $43 billion).

Before getting into the nitty-gritty of which budget lines see what reductions, the document does not carry the down-the-middle, dispassionate tone presented by the nonpartisan Congressional Budget Office, say, or the Joint Committee on Taxation.


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