As lawmakers and President Obama haggle over a sequester deal in Washington this week, people are nervous about more than $1 trillion in budget cuts and how they will affect jobs and the economy.
The White House ratcheted up the pressure on Sunday by releasing numbers on how the across-the-board budget cuts would hurt each state and the District of Columbia. Then, several GOP governors jumped into the battle, voicing concerns about disappearing federal funds to states. Republicans are also nervous about how the cuts will affect the military and defense preparedness.
At the same time, accusations were flying around Capitol Hill that one party or another was stalling a deal on the budget cuts, to make a point or to extract some longer-term concession in budget negotiations.
Here’s what you need to know about the sequester, including some online resources if you want to become a “policy wonk” and start crunching some numbers:
1. Who created this sequester thing in the first place?
The actual tool to cut government spending for the military and social programs, across the board, dates back to the eras of President Ronald Reagan and President Bill Clinton. The current sequester threat is part of the Budget Control Act of 2011, or BCA.
The BCA contained a “poison pill”–the threat of stark budget cuts by January 2013–if a committee of House and Senate members couldn’t deal with a separate but related problem, the debt ceiling. That committee failed in late 2011.
The sequester threat was pushed back to March 1, 2013, as part of a compromise made in January over the dreaded “fiscal cliff.” The cliff was the combination of the debt ceiling expiring, tax laws expiring, and the sequester cuts taking affect at the same time.
2. Why is the sequester threat such a bad thing?
Whether the sequester is good or evil is debatable. Research from the Congressional Budget Office in January pointed out the sequester could cut the nation’s gross domestic product by more than 1 percent this year. Some forecasts said more than 700,000 jobs could be lost if the cuts are fully implemented. Others are higher.
For now, Wall Street isn’t fully convinced a full-blown recession is on the way, partly because there’s still an expectation of a sequester deal at some point.
In the long run, the sequester cuts would help cut the government deficit, which would likely benefit the economy. But it would be a painful path, since the immediate cuts to social programs and military spending would hurt constituents dear to both parties.
3. So what exactly is getting cut?
The sequestration of funds requires that most government agencies cut their budgets by the same percentage across the board. Currently, the cuts add up to $1.2 trillion over a decade. It will be $85 billion for the 2013 fiscal year, which started in October.
Right now, non-military government agencies need to cut their costs by 8.2 percent starting on March 1, 2013. Defense branches will have to cut costs by 9.4 percent. (Those percentages will be lower for the first year of cuts.)
Last fall, President Barack Obama’s administration gave a detailed report through the Office of Management and Budget about which agencies had to cut costs–and which government folks were exempt.
Included in the mandatory cuts is money that members of Congress use to hire and maintain their staffs. But pay for Congress won’t get cut, because their pay, at least for the current term, is protected by the 27th Amendment.
Congressional pay is just one of many programs exempt from cuts. According to the Congressional Research Service, “Most exempt programs are mandatory, and include Social Security and Medicaid; refundable tax credits to individuals; and low-income programs such as the Children’s Health Insurance Program, Supplemental Nutrition Assistance Program, Temporary Assistance for Needy Families, and Supplemental Security Income.”
But federal government services could be directly affected that include everything from air traffic controllers to food inspectors.
4. How might the sequester hit home for me?
Let’s look at the three states that contain or border the National Constitution Center: Delaware, New Jersey, and Pennsylvania. If you want to do your own research, The Washington Post has a very detailed interactive feature.
According the White House’s figures, Pennsylvania will lose $26.4 million in funding for education, while New Jersey will lose $11.7 million and Delaware will lose $1.4 million.
In addition, the estimated numbers of civilian jobs that could see furloughs are 26,000 for Pennsylvania, 11,000 for New Jersey, and 2,000 for Delaware.
Funding will be cut for some social programs related to daycare, Head Start, meals for seniors, vaccinations for children, and educators who work with the disabled.
But according to the magazine Governing, about 82 percent of federal funds to states aren’t included in the sequester cuts. For example, Medicaid and the Children’s Health Insurance Program are exempt.
Delaware Governor Jack Markell told Governing on Friday that the cuts will be felt.
“This is not some theoretical number you toss up in the air,” Markell said. “This is impacting real people, vulnerable people. … For many of us, our state budgets are significantly challenged. We’re not really in a position to say ‘we’re going to supplant with state funds.’ ”
That’s the same problem that Governor Tom Corbett and Governor Chris Christie face in two states that need every penny from the federal government, especially for educational programs.
The timing of these cuts is still up in the air and could be made on a department-by-department level.
According to The Washington Post, federal employees need five weeks’ notice before their days can be furloughed. States will need to make cuts based on the availability of other local funds that can make up the difference.
5. What happens next?
The next big deadline for Congress, assuming the sequester goes into effect on Friday, is March 27. That’s when stopgap budget funding for federal government operations runs out and the government faces a possible shutdown. The deadline for the debt ceiling follows next, on May 18.
Expect negotiations over the sequester to be rolled into talks about the continuing resolution and a federal government shutdown in late March.
Matthew Yglesias from Slate.com puts the sequester versus the shutdown in a broader context.
“The good news is that the tough negotiations that’ll be needed to either avert or else end a government shutdown provide ample opportunity to resolve the problems associated with the sequester. For starters, however the appropriations dispute is resolved, it’ll end up superseding sequestration in terms of how much money is spent overall,” he says.
What’s unknown for the states affected by the sequester cuts is how much spending will return after a new overall budget deal is reached in Washington.
Republicans want federal spending cuts in return for concessions made in the fiscal cliff deal in January.
Scott Bomboy is the Editor-In-Chief of the National Constitution Center.
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