OMB Asks for Agency Cuts in 2013

On OMB's blog, OMB director Jack Lew talked about his instructions to agencies to cut 5 percent off their 2011 budget for their FY 2013 request. In addition, they are instructed to list additional savings that would result in a 10 percent cut. 

This type of request is nothing new. Last year, the Administration requested that agencies do the same thing, asking for a 5 percent cut off of their 2010 budget for FY 2012. However, the purpose of that exercise was to maintain a proposed discretionary spending freeze. The purpose of this year's 5 percent cut is to adhere to the discretionary spending caps in the Budget Control Act (BCA).

The BCA has a FY 2013 discretionary cap at $1.047 trillion, which is about 2 percent below the 2011 number from the final CR. The Administration is overshooting that target by asking for 5 percent cuts from lower priority programs so they can plug some of the savings back into higher priorities. In addition, Lew instructed agencies to only hit discretionary spending rather than also hitting mandatory programs, a strategy Congressional Democrats used to "spread the pain" in the April 2011 CR.

Discretionary Spending Under the BCA
  2011 2012 2013
Discretionary Caps (billions) $1,067 $1,043 $1,047
Percentage Change from FY 2011 N/A -2.2% -1.9%
Discretionary Caps with Trigger (billions) $1,067 $1,043 $948*
Percentage Change from FY 2011 N/A -2.2% -11.2%

*Rough estimate based on a Bipartisan Policy Center table.

Although the purpose of the 10 percent cut is to provide an alternate way to cut deeper and re-invest in higher priority spending, it is worth noting that this cut would almost bring discretionary spending in line with the trigger that would hit if the Super Committee fails. That mechanism would further cut discretionary spending by roughly $100 billion below the $1.047 trillion topline number, corresponding to about an 11 percent cut from the 2011 total. The trigger comes down on January 1, 2013, so it would hit three months into FY 2013.

Obviously, the Administration is not planning on having to comply with the trigger, but they are clearly already planning ahead to life under the BCA caps.