To Understand the Budget Debate, You Need to Understand the Sequester. Here's a Quick Primer.

by Kevin Mahnken | September 29, 2013

photo credit: Getty Images/Mark Wilson

Someday, these budget wars are going to end. On that day, when the world is once again safe for the passage of farm bills and Ted Cruz has finally run out of historical analogies, we’ll remember the Great Budget Negotiation of 2013 as little more than a chapter in a far longer story: that of the sequester.

While political commentators understandably fret about the prospects of government shutdown and default, or else gawk at the latest Republican plan to defund Obamacare, the most significant budgetary guidelines have already been written into law for two years, and will continue to affect the scope of government for another eight. A new round of appropriations horse-trading (or, more likely, horse-shooting) will commence this time next year, but, like this month’s mess, it will have to operate within the spending levels set by the 112th Congress—at least until the sequester is modified or repealed.

And since you can’t follow the impending fiscal cataclysm without a scorecard, we're proud to present your official Sequester Primer! Read along to find out everything an armchair budget observer needs to know about the law—except what the hell we did to deserve it.

What is it?

The sequester is a series of annual spending cuts to the federal government, from Fiscal Year (FY) 2013 to FY2021. Since it went into effect on March 1, we’re living through it right now. Divided evenly between defense and non-defense funding, it cuts $85 billion from public programs, projects, and activities this year before ballooning up to $109 billion next year in FY2014—and every year, until it finally expires and goes to join Prohibition, the Sedition Act, and racially-derived immigration quotas in whereever the hell bad policies go after they die. The total program cuts will amount to roughly $1 trillion, plus another $200 billion or so in reduced debt-service payments, for a total of $1.2 trillion over the course of nine years.

How did this happen?

Remember the doomsday machine in Dr. Strangelove? To bypass the huge difficulty and expense of keeping up with the United States in the arms race, the Soviets concoct a nuclear apparatus that will automatically exterminate humanity if another country ever launches a first strike against it. The sequester is very much like the doomsday machine.

 It was designed in the wake of the 2011 debt ceiling crisis, when President Obama and Senate Democrats were first extorted into trading spending reductions for an increase in the debt ceiling. Created by the Budget Control Act, a 12-person Joint Select Committee on Deficit Reduction (the so-called “Supercommittee”) was tasked with finding $1.5 trillion in savings over a 10-year period, or else face the sequester’s much harsher mix of automatic cuts; Democrats even made sure that the military couldn’t be exempted, just so Republicans would have some skin in the game.

It turns out that doing anything, even when hundreds of billions of dollars in sacred federal expenditures are at stake, is still way too much to expect from Congress. The Supercommittee—in keeping with the grand tradition of futile bipartisan conclaves—failed, and the sequester was set to begin January 2 of this year. A two-month reprieve was granted before the cuts at last began to be implemented in March.

Has this ever happened before?

But that’s not the whole story. The current fiscal retrenchment is often described as “unprecedented”—and it is, in terms of scale, duration, and impact; but the tactic of budget sequestration was actually first used in 1985. In response to Reagan-era deficits, the Senate came up with the Balanced Budget and Emergency Deficit Control Act of 1985 (commonly referred to as Gramm-Rudman-Hollings, in reference to its famous-in-D.C. sponsors). The bill mandated crude, annually-shrinking deficit targets in an effort to force a comprehensive debt agreement between Congress and the White House, just like the Budget Control Act a quarter-century later. Can you guess what else it had in common with its successor legislation?

Yeah, it failed completely. The enforcement mechanism was declared unconstitutional by the Supreme Court, and the cuts circumvented until President Bush eliminated them completely by signing far more effective debt legislation in 1990. Steve Bell, an analyst with the Bipartisan Policy Center who served in the Senate at the time as a highly influential budget aide, said in an interview that the cuts were “so large as to be irresponsible, so they simply didn’t enforce them.” Listening to anti-debt jeremiads of the present day, he claims that the historical echo is unmistakable: “It’s like the movie Groundhog Day. I’ll hear a speech and think, ‘Oh yeah, I’ve heard that speech before. I may have written that speech before.’”

Whom does it hurt?

The portion of the budget that will be contracted by the sequester is limited almost entirely to discretionary spending. These are the annually-appropriated funds authorized and appropriated to the various agencies and departments colloquially referred to as “the gubmint”: From MV-22 Ospreys to Head Start classrooms, federal penitentiaries to national parks, FDA inspections to disaster preparedness, nothing is safe from the blood-letting. This kind of spending, while often extremely popular, is where you go to find loose change when the big entitlements are off-limits (Medicare is one of the few mandatory programs that will be subject to the sequester, in the form of diminished provider fees; these cuts cannot exceed 2 percent, however, while defense and non-defense discretionary spending will be slashed at rates of 7.9 percent and 5 percent, respectively).

Annually-appropriated spending also a terrible source of savings. Comprising just 30 percent of the total budget, it has also grown at a far slower rate over the last two decades than mandatory entitlement costs, which are driven by the stratospheric inflation in the cost of healthcare. By focusing cuts on discretionary spending and sparing mandatory spending the axe, Bell argues, we have locked in our own bad habits. “By definition—by cutting across the board and only touching a minority of spending—the sequester keeps in place the very priorities that you want to change as a federal government,” he says. “We say we need more money for education, science, health research, and infrastructure—and those are the exact areas hit domestically by the sequester.”

OK, so now what?

Gold star to anyone who said, “More sequester!”

The current budget fight is mostly portrayed as one between House conservatives desperate to couple the FY14 budget to the elimination of Obamacare and Senate Democrats refusing to support anything but a “clean” continuing resolution (CR)—one that funds the government for another 11 weeks without any further policy agenda attached. This depiction is accurate as far as it goes, but ignores the role of House Democrats, whose leadership is now claiming that they won’t vote to continue sequester-level spending.

The Senate sent back the Republican CR stripped of its Obamacare provision on Friday, though they still approved a sequester-induced cap on federal spending at $988 billion—if only for a period of several weeks. Their House counterparts have now vowed to ignore that figure and instead push for a $1.058 trillion, the level originally set by the Budget Control Act. House Democratic Caucus Chairman Xavier Becerra called the Republican budget proposal “lunacy,” and Minority Whip Steny Hoyer has promised a fight. Meanwhile, a sizable Republican rump will also vote down legislation that doesn’t go after health care reform. The sequester could therefore become one of the prime movers behind a government shutdown.

Meanwhile, federal accountants are staring nervously at their ledgers. Even if a shutdown is averted, the sequester’s second year could prove calamitous in a way the first has not. Agencies and departments can nibble around the edges for months at a time, shifting cuts from operations to procurement and protecting their most vital functions. In Bell’s estimation, next year’s sequestration will put an end to those tactics: “You’ve canceled your conferences, canceled your trips. You’ve cut back on how often you get your computers serviced and how much paper you’re going to use. You haven’t filled new positions as they’ve come open, and you’ve managed to scrape by,” he says. “In the second year, all those ‘easy things’ are no longer available to you.”

This post has been updated.

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