U.S. spending ax set to fall, but then what?

WASHINGTON Mon Feb 25, 2013 10:57am EST

U.S. President Barack Obama makes a toast during the 2013 Governors' Dinner in the State Dining Room of the White House in Washington February 24, 2013. REUTERS/Joshua Roberts

U.S. President Barack Obama makes a toast during the 2013 Governors' Dinner in the State Dining Room of the White House in Washington February 24, 2013.

Credit: Reuters/Joshua Roberts

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WASHINGTON (Reuters) - Devastating, unthinkable, shameful, brutal, disastrous. These are just a few of the adjectives used by lawmakers, officials and President Barack Obama to describe the across-the-board budget cuts likely to take effect on Friday, March 1.

The spending reductions are called "automatic," as if no one can stop them. But the same people who enacted them into law in August 2011 - lawmakers from both parties in Congress and Obama - could have ended them at any time and still can.

But they have never agreed on an alternative way to achieve the savings they all say they desire, with Obama insisting on a mix of spending cuts and tax increases on the wealthiest Americans and Republicans demanding only cuts in spending.

The risks are high for Republicans and Democrats alike but, at the moment, hard to calculate because the public may not feel the impact of the cuts for weeks or months.

With time running out before the $85 billion "sequestration" is triggered, here are some ways the next few weeks could play out.


In the days leading up to the March 1 deadline for sequestration, the Senate is likely to make futile attempts to avoid these harsh spending cuts. Two alternatives are likely to be offered, with the expectation that both are too partisan to get enough votes to pass.

Democrats will demand a vote on their plan to kill the across-the-board spending cuts by instead eliminating some agriculture subsidy payments, making minor defense cuts in later years and raising taxes on the richest Americans, a particular non-starter for Republicans.

Senate Republicans have not yet unveiled their proposal. One idea is to keep the cuts but give the Obama administration more flexibility in implementing them. Another Republican suggestion is to cut the federal workforce by 10 percent through attrition as an alternative to sequestration.

A third idea circulating is to stage a vote on a constitutional amendment requiring a balanced U.S. budget, a perennial part of the Republican agenda. Even if it were to pass Congress, which is highly unlikely, it could take years, if ever, for enough states to go along with amending the Constitution.

In the run-up to the March 1 deadline, the Republican-led House of Representatives will mostly sit on the sidelines, arguing that it passed an alternative to sequestration last year, which had no hope of passing the Democratic-controlled Senate.


Once the Senate's two partisan votes are out of the way, lawmakers could then think about a compromise. Here is what could prod them:

With the automatic spending cuts technically beginning on March 1, the Obama administration is expected to issue a 30-day advance notice of furloughs for federal workers. Air traffic controllers, the Coast Guard, airport security screeners, national park rangers, meat inspectors and FBI agents would be among those facing reduced work weeks that the administration says would greatly inconvenience the public and harm essential government services.

If public outrage surfaces, Democrats and Republicans will each try to direct that anger onto their opponents. Once it becomes clear who is winning the blame game, the losing side will look for the best deal it can broker.

March 27, or more like March 22, could become the new deadline for finding a solution. March 27 is meaningful because that is when an unrelated "continuing resolution" to fund most government operations expires. Without new money, the government immediately shuts down.

There appears to be no appetite on either side for a government shutdown.

But Democrats and Republicans in Congress might use the prospect of a shutdown as leverage to force a deal on sequestration, or even a broader deficit reduction plan. This could contain some of the tax hikes or spending cuts debated in the Senate just prior to March 1.

But the real deadline might be March 22. That is when a spring congressional recess is supposed to start. Lawmakers, who do not like their recess plans disrupted, are likely to try to settle both the continuing resolution and sequestration before the scheduled start of the break.


The predicted impact of the spending cuts - such as flight delays, limited hours at popular national parks, furloughs of civilian Pentagon employees, reductions in funding of medical research and even huge cutbacks at federally funded schools - could take weeks or months to materialize. If a few weeks into sequestration the public merely shrugs over this oddball budget fight because nothing horrible has actually happened yet, that could change the outlook.

Conservative Republicans could begin arguing more forcefully for just keeping in place the $85 billion in across-the-board cuts, divided equally between defense and non-defense programs. They like the idea of locking in the savings without any tax hikes.

But plenty of Republicans, as well as Democrats, still might think the sequestration is too much of a blunt instrument, offering no flexibility to officials as they slash programs, and there could be a move to put it off temporarily.

Congress has done that once already in its rushed, January 1 law avoiding the "fiscal cliff," which was yet another up-against-the-wall budget fight.


The White House and government agencies could try to limit damage from the cuts through subtle shifts of funds. The way sequestration is organized, each spending account subject to the reductions gets a mandatory haircut - around 9 percent to 13 percent, according to the White House budget office. Funds cannot be shifted from say, wetlands environmental regulation to air traffic controllers' salaries.

But there is room to decide how to spend money within these accounts, some of which run into the billions of dollars, and experts say there may be some flexibility to shift money around. The administration, eager to keep pressure on Congress, is not ready to talk about its plans in this area.

The big divide between Democrats and Republicans boils down to this: Democrats want more tax increases on the richest Americans to help bring down budget deficits; Republicans vow to block them.

Republicans want to cut more domestic spending and especially the cost of social safety net programs such as Social Security retirement and Medicare healthcare benefits for future seniors, those now 55 and younger. Democrats have shown little interest.

With enough pressure for a deal, there could be small steps in each direction, but it will not be an easy path.

Meanwhile, if and when this year's sequestration fight is resolved, another one could start up later in the year. That is because sequestration is not just a one-year event. It is a decade-long program requiring a total of $1.2 trillion in savings. A fight over what to do about next year's sequestration would confront Congress later this year if a broader budget deal cannot be reached.

(Additional reporting by David Lawder; Editing by Fred Barbash, Martin Howell and Eric Beech)

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Comments (20)
jaham wrote:
Then what?

1) We will have a battle over the debt ceiling just as Obama opposed raising it in 2006 under then POTUS GWBush.

2) The Democrats in the Senate will have to pass a budget for the first time since April 29, 2009 (compared to House Republicans having passed a budget every year Obama has been in office) instead of operating under the continuing resolution.

3) Obama will accomplish very little for the remainder of his lame duck term.

Feb 25, 2013 11:15am EST  --  Report as abuse
xyz2055 wrote:
jaham..has it ever donned on you how retarded arguing over the debt ceiling is? Legislation written and passed by Congress that created the spending. Exactly what are they arguing? That Obama made them do it? lmao

Feb 25, 2013 1:47pm EST  --  Report as abuse
xyz2055 wrote:
jaham..btw..Republicans have held the House for only two years since Obama was elected. So they couldn’t have passed a budget every year Obama was in office. But which of their budgets would you like to talk about? The Ryan budget that spends $7T on tax breaks and Defense before even talking about cutting spending or H.R. 5652 that essentially holds the status quo (the debt continues to increase at the same rate). Grid lock is usually a good thing (see the Clinton years), unless you inherit a $1T deficit from the last administration.

Feb 25, 2013 1:56pm EST  --  Report as abuse
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