President Obama has insisted that sequestration will be avoided, possibly as part of a broader deal that would seek to contain Medicare and Medicaid costs, along with settling whether to continue at least some of the Bush-era tax cuts that expire at year's end. (File)
Federal agencies and the White House have a variety of short-term stratagems to delay employee furloughs and other effects of budget cuts set to begin early next year, a liberal-leaning research and advocacy group says in a new report.
The Office of Management and Budget, for example, could temporarily accelerate the rate at which it apportions money to agencies on the assumption that Congress would retroactively cancel the reductions soon after they kick in Jan. 2, according to the report by OMB Watch. Agencies in some cases could tap leftover money from previous years that has not been committed to a specific purpose or juggle money among different accounts. A stopgap spending bill running through March specifically allows agencies to tap money from pay and benefits accounts as fast as needed to avert furloughs, the report said.
The cuts, officially known as sequestration, would affect new and existing contracts differently, it added. Contracts negotiated in past years, with funding already in place, would generally be spared, although options exercised after Jan. 2 could face reductions. There “have been many signs that the administration does not plan to substantially rework or reduce funding for existing contracts, even if has the authority to do so,” the report said.
And although, for example, the Defense Department’s ability to award new contracts would be affected, contractors wouldn’t feel the full impact of the revenue decline for several years, the report said, citing an August study by the Center for Strategic and Budgetary Assessments.
Overall, OMB Watch outlines a less dire picture of sequestration’s immediate impact than contractor lobbies and other groups that forecast massive job losses. OMB Watch’s conclusions, however, assume that sequestration would last no more than a month, followed by retroactive cancellation back to Jan. 2.
The across-the-board cuts, which would total about $109 billion in fiscal 2013, are required by last year’s Budget Control Act unless Congress and the White House come up with another path to reducing future budget deficits by $1.2 trillion through 2021. A final chance to do that will come when lawmakers regroup for a lame-duck session scheduled to start Nov. 13.
For most defense programs, sequestration would mean a 9.4 percent cut for fiscal 2013, while domestic discretionary accounts would take an 8.2 percent hit, according to an OMB overview released in September. Military personnel and the Veterans Affairs Department would be exempted, according to the White House.
So far, the budget office has not published any formal instructions on how agencies should prepare for sequestration.
President Obama has insisted that sequestration will be avoided, possibly as part of a broader deal that would seek to contain Medicare and Medicaid costs, along with settling whether to continue at least some of the Bush-era tax cuts that expire at year’s end.
“It will probably be messy. It won’t be pleasant,” Obama told executives with the Des Moines Register in an interview last month. “But I am absolutely confident that we can get what is the equivalent of the grand bargain that essentially I’ve been offering to the Republicans for a very long time, which is $2.50 worth of cuts for every dollar in spending, and work to reduce the costs of our health care programs,” according to a transcript posted on the Iowa newspaper’s website.
But Obama also suggested that agreement would not come by Jan. 2. Assuming that he’s re-elected Tuesday to another four-year term, he said, “we’re going to be in a position where I believe in the first six months we are going to solve that big piece of business.”