Line Items: Sequester Edition
Sequester Week – It’s all about sequestration this week as the March 1 deadline for the $85 billion in across-the-board cuts looms (read all about the sequester here). The deadline at the end of the week is the culmination of a chain of events begun a year and a half ago with the Budget Control Act (BCA). The BCA avoided a national default by raising the debt ceiling in exchange for some spending cuts and mechanisms to ensure further deficit savings, including sequestration. The reasoning was that the sequester would be so unpalatable to both parties, with abrupt spending cuts equally divided between domestic and defense spending, that lawmakers would seek a deal on a more thoughtful and comprehensive approach. That logic failed both when the Super Committee was unable to come up with a plan to replace the sequester and at the beginning of the year when the deadline for the sequester was delayed for two months. The sequester is a symbol of the failure of our leaders to compromise and work together in the best interests of the country. The Fix the Debt Campaign has a handy report card you can use to grade the performance of our policymakers.
All Quiet on the Sequestration Front – Congress is back is in session this week, but policymakers are by no means exhausting themselves in trying to avoid the cuts from taking effect. While Washington has become quite adept at averting disaster at the last minute, every indication at the moment is that sequestration will take effect on Friday even though everyone wants it replaced. With no deal in sight, there are plans to vote on Democratic legislation that will replace the sequester with an even mix of spending cuts and additional revenue and a Republican bill to give agencies more flexibility in carrying out the sequester. Neither measure is expected to garner support from the opposite party. Alan Simpson and Erskine Bowles also put forth a plan for $2.4 trillion in deficit savings that could replace the sequester last week.
On to the Next Deadline – Though they don’t realistically plan to solve the sequester by Friday, policymakers are already looking ahead to the next fiscal deadline. On March 27 the stopgap measure funding federal operations will expire and the federal government will shut down unless agreement is reached. Lawmakers have all but given up on enacting a comprehensive budget blueprint for the rest of the fiscal year, but they will want to agree on another stopgap measure to prevent a shutdown. The battle will be over spending levels, as in if the sequester is reflected or not, and what kind of flexibility federal agencies will have in making cuts to meet the sequester. Currently, agencies have little flexibility in deciding what gets cut and what doesn’t, but a new continuing resolution could re-assign those cuts. There are lots more fiscal speed bumps down the road, as illustrated by our infographic.
Stating the Case – President Obama is on the road making the case for his approach to replace the sequester with a mix of spending cuts and revenue increases, with a White House spokesman saying the spending cuts to revenues ratio for a sequester replacement could be 2 to 1. To make the case that sequestration will be harmful to Americans, the White House released fact sheets on how sequestration would affect each state and the District of Columbia. The Administration is also urging state governors to pressure lawmakers to avert the sequester.
No Hiding Fact the Debt Must Be Addressed – A new academic paper indicates that the U.S. may soon reach a point where the national debt seriously impairs the economy. The research implies that debt at 80 percent of the economy could result in a "debt trap" of spiraling interest rates and interest payments to service growing debt. At the same time, a recent survey of economists suggests that a comprehensive debt plan that involves all parts of the budget could boost the economy in 2014.
Lew Committee Vote This Week – The Senate Finance Committee will vote on the nomination of former Office of Management and Budget director Jacob Lew to be treasury secretary on Tuesday. The nomination is expected to go through and Lew will be a key player in the upcoming budget battles.
Key Upcoming Dates (all times are ET)
- Senate Finance Committee hearing on the CBO 2013 Budget & Economic Outlook at 10 am as well as an organizational meeting and vote on Jacob Lew to be Treasury Secretary.
- Senate Budget Committee hearing on the impact of federal investment on people, communities and long-ter meconomic growth at 10:30 am.
- House Armed Services subcommittee hearing on the impact of budget constraints on military end strength at 2 pm.
- Senate Aging Committee hearing on streghtening Medicare for today and the future at 3 pm.
- Bureau of Economic Analysis releases second estimate of 2012 4th quarter and annual GDP.
- Across-the-board cuts to defense and non-defense discretionary spending prescribed in the Budget Control Act, known as "sequestration," will take effect.
- Dept. of Labor's Bureau of Labor Statistics releases February 2013 employment data.
- Dept. of Labor's Bureau of Labor Statistics releases February 2013 Consumer Price Index data.
- Current continuing resolution (CR) funding the federal government expires.
- Bureau of Economic Analysis releases third estimate of 2012 4th quarter and annual GDP.
- Dept. of Labor's Bureau of Labor Statistics releases March 2013 employment data.
- Congress must pass a budget resolution as specified in the Congressional Budget Act. Also, due to the debt ceiling suspension bill, lawmakers will have their pay withheld after this date until their respective chamber passes a resolution.
- Dept. of Labor's Bureau of Labor Statistics releases March 2013 Consumer Price Index data.
- Bureau of Economic Analysis releases advance estimate of 2013 1st quarter GDP.