- Obama, Congress try to avert automatic budget cuts
- The $1.2 trillion in cuts were part of a plan to end the 2011 debt ceiling standoff
- Congress was supposed to replace them with other 10-year spending reductions, but failed
Here we go: A new round of confrontation between the White House and Congress over the federal budget is in the offing, this time in a new attempt to avert the looming "sequestration" process.
What is sequestration?
It's a series of automatic, across-the-board cuts to government agencies, totaling $1.2 trillion over 10 years. The cuts would be split 50-50 between defense and domestic discretionary spending.
It's all part of attempts to get a handle on the growth of the U.S. national debt, which exploded upward when the 2007 recession hit and now stands at more than $16 trillion. The sequester has been coming for more than a year, with Congress pushing it back to March 1 as part of the fiscal cliff deal at the end of the last session.
Why does this seem familiar?
It started with the 2011 standoff over the U.S. debt ceiling, when Republicans in Congress demanded spending cuts in exchange for giving the Obama administration the needed legal headroom to pay the federal government's obligations to its bondholders. In the end, Congress and the administration agreed to more than $2 trillion in cuts. About $1 trillion of that was laid out in the debt-ceiling bill and the rest imposed through sequestration -- a kind of fiscal doomsday device that Congress would have to disarm by coming up with an equal amount of spending reductions elsewhere.
What were they thinking?
The plan was that a special congressional panel, dubbed the "super committee," would find a less painful way to cut spending. It failed in November 2011. That left federal agencies facing what outgoing Defense Secretary Leon Panetta called "legislative madness" in the form of harsh cuts that no one wanted.
"For those of you who have ever seen 'Blazing Saddles,' it is the scene of the sheriff putting the gun to his head in order to establish law and order," Panetta said in a speech at Washington's Georgetown University. "That is sequestration."
But for many conservatives, sequestration is a feature, not a bug. It's "the first chance we have for real savings and deficit reduction," the tea party-aligned lobbying group FreedomWorks tells supporters on its website.
"President Obama already agreed to the sequester savings when he signed the debt ceiling bargain into law," FreedomWorks says. "He needs to follow through."
Where will the cuts fall?
More than $500 billion will be cut from the Defense Department and other national security agencies, with the rest cut on the domestic side -- national parks, federal courts, the FBI, food inspections and housing aid. While the Pentagon has laid out plans ranging from furloughs of hundreds of thousands of civilian workers to combat readiness training and weapons maintenance, the White House budget office hasn't specified which domestic agencies would take the biggest hits.
Panetta says that the $46 billion in spending cuts for 2013 would cut sharply into military readiness -- and the longer the cuts are pushed back, the deeper they'll have to be to achieve the required savings.
So now what?
Congress put off the sequester until March 1 as part of the last-minute fiscal cliff deal on New Year's Day. Without that agreement, economists warned that the one-two punch of sequestration and the expiration of the 2001 and 2003 Bush tax cuts could have thrown a still-struggling U.S. economy into reverse.
Even with the fiscal cliff deal, the austerity moves already were slowing the economy, Obama suggested over the weekend. The Commerce Department said a large cut in federal spending, primarily on defense, contributed to the 0.1% decrease in gross domestic product seen in the last quarter of 2012.
"Washington cannot continually operate under a cloud of crisis. That freezes up consumers," Obama said during a pre-Super Bowl interview with CBS. "It gets businesses worried. We can't afford these self-inflicted wounds."
Tuesday, Obama urged Congress to pass a short-term deal that puts off the cuts, allowing some breathing room for a long-term deficit reduction plan. But Obama said any deal should include more revenue from ending some tax breaks -- a stance that inflamed Republicans who already had to swallow a tax increase for top earners in the fiscal cliff deal.
"I don't like the sequester. I think it's taking a meat ax to our government, a meat ax to many programs that will weaken our national defense," House Speaker John Boehner, R-Ohio, said Wednesday. But, he added, "Americans do not support sacrificing real spending cuts for more tax hikes."