Across the Board Budget Cuts: Sequestration Starts at Midnight

By: CBS News Email
By: CBS News Email

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As the sequester starts to take effect, President Obama said today that the economic impact the nation will see in the coming months is "happening because of a choice Republicans in Congress have made."

Mr. Obama held a private meeting with congressional leaders from both parties this morning to talk about the sequester, which will slash $85 billion from the budget this fiscal year and $1.1 trillion more over 10. There's widespread agreement the indiscriminate cuts will take a toll on the economy and hit the wrong part of the budget. They go into effect today, however, because the president and Congress failed to agree with a budget savings plan with which to replace them.

"This is not the apocalypse. It's just dumb," Mr. Obama told reporters in the White House briefing room today, following his meeting with House Speaker John Boehner, R-Ohio; House Minority Leader Nancy Pelosi, D-Calif.; Senate Majority Leader Harry Reid, D-Nev.; and Senate Minority Leader Mitch McConnell, R-Ky.

"I don't anticipate a huge financial crisis, but people are going to be hurt," he added. "The longer the cuts remain in place, the greater the damage to our economy... Every time we get a piece of economic news over the next month, the next two months, the next six months, we'll know that economic news could have been better if Congress had not failed to act."

Mr. Obama said he is "prepared to to do hard things and to push my Democratic friends to do hard things" when it comes to modifying programs like Medicare in order to achieve budget savings.

However, he said he can't "do a Jedi mind-meld" to force Republicans to meet him part way by agreeing to closing tax loopholes.

"I put forward a plan that calls for serious spending cuts, serious entitlement reforms...goes right at the problem that is at the heart of our long term problem... so far we've gotten rebuffed because what Speaker Boehner and the Republicans said is, we cannot do any revenue," the president said, when asked whether he takes any of the blame for the ongoing gridlock. "So what more do you think I should do?"

In today's meeting, according to Boehner's office, Republican leaders told the president they're willing to close tax loopholes, but not as part of a plan to replace the sequester. Any revenue generated by closing tax loopholes should be used to lower tax rates and create jobs, they said.

"This discussion about revenue in my view is over," Boehner said to reporters outside of the White House this morning after the meeting. The speaker also chided the Senate for failing to pass a plan to avert the sequester, even though the GOP-led House managed to pass two sequester replacement plans last year. Yesterday, the Senate rejected two competing plans to replace the sequester, a Democratic plan and a Republican plan. The Democratic plan managed to win the support of a simple majority -- though without any GOP support -- but it failed to get the votes necessary to break a filibuster.

Boehner also told told the president this morning he intends to hold a vote in the House next week on another bill -- called a continuing resolution -- that will extend the regular budget for federal government operations. The current continuing resolution is set to expire on March 27, and if Congress fails to pass a new one, the federal government would partially shut down.

"I'm hopeful that we won't have to deal with the threat of a government shutdown while we're dealing with the sequester at the same time," Boehner said to reporters. "The House will act next week, and I hope that the Senate will follow suit."

Mr. Obama was evasive today when asked whether he would sign a continuing resolution bill that keeps the sequester in place. He only said he would of course sign a bill that keeps spending at its current levels, which were agreed to in the Budget Control Act.

"I made a deal for a certain budget, certain numbers," he said. "There's no reason why that deal needs to be reopened. It was a deal that Speaker Boehner made as well and all the leadership made. And if the bill that arrives on my bill is reflective of the commitments that we previously made, then obviously I would sign it because I want to make sure that we keep on doing what we need to do for the American people."

In the coming weeks, Mr. Obama said he would be reaching out to Republicans who in private say they are willing to close tax loopholes in order to avert the sequester, as well as Democrats who'd rather make "smart" cuts to entitlements like Medicare than let the sequester happen.

"There is a caucus of common sense up on Capitol Hill," he said. "It's just...It's a silent group right now, and we want to make sure that their voices start getting heard."

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Tomorrow, barring a last-minute Washington miracle, President Obama will officially order the highly-anticipated, much-dreaded "sequestration" - an across-the-board set of budget cuts totaling $1.2 trillion from defense and non-defense spending over the course of the next ten years. The administration has been vehement in its calls for Congress to find a way to avert the legally-mandated package: The cuts, Mr. Obama says, will result in hundreds of thousands of lost jobs, crippling losses for the nation's public education system, defense cuts that would leave the country unprepared for future military engagements, and a number of day-to-day inconveniences, like long lines at the airport and the shuttering of some public parks.

As sequestration officially becomes law of the land, however, its impacts won't immediately be clear: Despite warnings of an economic turndown, cuts for 2013 will be rolled out over the next several months, triggering a government slowdown that will hit different agencies with various degrees of speed and impact as time goes on. And its toll, whatever it ends up being, will likely be drawn out and murky, with sources nearly unidentifiable to the average voter.

"It will be like a rolling ball," said Homeland Security Secretary Janet Napolitano, of the manner in which the cuts will impact the economy, in remarks to reporters this week. "It will keep growing."

What will happen on March 1?

According to the Budget Control Act of 2011, sequestration will cut $85 billion from the federal budget in the remainder of the 2013 fiscal year, slashing about $1.1 trillion more over the next decade. The White House has recently released a slew of memos detailing what they believe those cuts would look like on both a state and program level:

"The Office of Management and Budget (OMB) now calculates that sequestration will require an annual reduction of roughly 5 percent for nondefense programs and roughly 8 percent for defense programs," according to one fact sheet. "However, given that these cuts must be achieved over only seven months instead of 12, the effective percentage reductions will be approximately 9 percent for nondefense programs and 13 percent for defense programs. These large and arbitrary cuts will have severe impacts across the government."

According to the White House, that means "10,000 teacher jobs would be put at risk, and funding for up to 7,200 special education teachers, aides, and staff could be cut"; loans to small businesses would be reduced by up to $540 million; research and development would be stalled as thousands of researchers and scientists would be at risk of losing their jobs; and "up to 373,000 seriously mentally ill adults and seriously emotionally disturbed children could go untreated," among other impacts.

Those calculations, however, assess the impacts of sequestration over the course of the fiscal year. But assigning and implementing those reductions will take time, and agencies will presumably do their best to blunt or delay the impacts of the reductions, moving money around, reassigning carry-over funds, delaying the announcement of new contracts and grants, and taking advantage of whatever flexibility they have.

Ultimately, however, agencies will be forced to make choices about where to make cuts. Various departments have already implemented preemptive hiring freezes, and have begun to pinpoint ways to save; they've also identified those areas they say cannot afford to take the hits, and that they'll try to protect from sequestration.

"Under sequestration we're going to keep fully supporting our troops downrange but we're going to see a really pernicious erosion of military readiness of facility readiness and modernization stateside," said Elizabeth Robbins, a spokesperson for the Department of Defense, in an interview with CBSNews.com.

For Robbins' department, that means prioritizing operations and maintenance over research and development, she said, resulting in cutbacks on training not directly related to upcoming missions, the cancellation of some ship and aircraft maintenance in March, and the furlough of nearly 800,000 civilian employees at least one day a week. Robbins argued the furloughs would cause pain not just for the employees - who would be seeing a 20 percent pay cut - but also for the department's operational productivity.

The Federal Aviation Administration (FAA) has also detailed the prospect of furloughs, which representatives say will likely result in the elimination of late-night shifts at around 60 air traffic control towers, and lead towers at 100 small airports to close altogether. The FAA estimates that flights to major cities like New York, Chicago, and San Francisco could be delayed by up to 90 minutes during peak travel hours, which would lead the airlines to preemptively cancel flights.

The Departments of Transportation (DOT) and Homeland Security, as well as the Transportation Security Administration (TSA), and others have warned of similar consequences: Fewer jobs, longer lines.

Most of these changes, however, won't take place until April. Legally, federal employers must notify their employees of a furlough 30 days in advance, which means no furloughs will go into effect until April 1 at the earliest. Moreover, not every agency has identified how it will implement the cuts; the Office of Management and Budget (OMB) plans to release a report on the specifics of agency cuts on March 1, at which point the appropriate actors will have to figure out how to implement. In some cases, working out those details will take time. In the meantime, a group of Republicans has proposed legislation that would give the Obama administration more flexibility in divvying up the cuts - a plan that, if implemented, would ostensibly require yet more decision-making, and more time.

There will, however, be a few immediate effects.

According to an OMB official, as of March 1, the Treasury Department and IRS will have to reduce payments that subsidize clean energy investments, school construction, state and local infrastructure projects, and other priorities.

A number of school districts will also be hit: While the majority of educational funding will not be affected until the 2013-2014 school year, so-called "impact aid" districts - those located on federal property and thus don't have a traditional tax base - will be hit on March 1.

According to Daren Briscoe, a spokesman for the Department of Education, about 1,200 impact aid districts, many of which are on military bases or Native American lands, will be faced with a cumulative $60 million worth of cuts. Of those districts, Briscoe says about 23 have been designated "heavily impacted," which means they get about half of their funding per student from the federal government.

Despite Democratic doomsday warnings, some Republicans -- though still pinning sequestration on the president -- are starting to argue that the cuts wouldn't necessarily be the worst thing in the world. After all, they argue, finding ways to trim waste, consolidate programs, and increase efficiency in existing government programs cuts would be better than allowing the deficit to grow.

"The federal government spends $3.5 trillion a year. This would be a little over two percent of that. Surely the government can find a way to trim a little," argued one Republican Senate aide. "Some of these scenarios they're presenting almost hurt the credibility of the administration, and the argument about the consequences of sequester."

Republicans also appear to be firm in their opposition to the prospect of further increases in tax revenue, which the president has proposed as part of his desired "balanced" approach to reducing the deficit and averting sequestration, which suggests a deal continues to be a long way off.

"The tax part is finished," said the Senate aide. "We did the tax part. Let's do the spending part. And there's balance."

© 2013 CBS Interactive Inc. All Rights Reserved.


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