On March 1, President Obama issued an order directing federal agencies to begin implementing “sequestration” – $85 billion in cuts that were not supposed to happen.
For weeks, it seemed a foregone conclusion that Congress would fail to agree on a way to replace these cuts by the March 1 deadline.  Negotiations among the Administration, House and Senate were non-existent.  But in the weeks approaching the deadline it was assumed that if cuts began to occur after March 1, pressure would intensify and a way to replace the cuts would be found in tandem with the next big deadline:  when the temporary spending bill covering all appropriations expires on March 27.  Instead, on March 1, the President met with House and Senate leaders and signaled that he was not interested in risking a government shut-down at the end of March.  Both the President and Senate Appropriations Chair Barbara Mikulski (D-MD) expressed the intention to handle the continued funding for FY 2013 appropriations separately, and few Republicans at this point would consider replacing the cuts if it means increasing revenues, no matter what the source.  While a loud outcry from the public once the cuts are felt could change the odds in Congress, right now the prospects for derailing the cuts before the end of the fiscal year are murky at best.

In a recent Senate Appropriations Committee hearing, witnesses from the Obama Administration were unified in their testimony that granting the Administration flexibility to move money around to reduce the indiscriminate nature of the across-the-board sequester cuts would not solve their problems.  But before the first full business day of living with sequestration had arrived, the Administration’s director of the Economic Policy Council, Gene Sperling, noted on weekend interview shows that the Senate would take up legislation to provide the Administration with more leeway to manage the cuts.  How that would affect the full range of human needs programs affected is not yet known.

The Sequester’s Beginnings.  Congress included sequestration – or across-the-board cuts in all but a number of exempted programs – in its deficit reduction legislation, the Budget Control Act of 2011.  The law set 10 years of appropriations caps, projected to save about $1.5 trillion through FY 2021.  Congress was supposed to agree on a plan to reduce the deficit another $1.2 trillion, which could be achieved by a combination of revenue increases and spending cuts.  To force itself to act, Congress included an enforcer – automatic cuts that would kick in if Congress could not agree on a plan.  Those cuts would be split 50-50 between Pentagon and domestic/international programs.

Congress had more than a year to come up with an alternative to cuts that would hit WIC nutrition, Head Start, public housing, unemployment benefits for the long-term unemployed, education, environmental and consumer protection, medical research, job training, air traffic and food safety, and a whole lot more.  The President and Congressional Democrats called for new revenues to play a part in replacing these cuts.  Congressional Republican leaders said no.

The House leadership pointed to legislation it had passed twice in 2012 to replace the sequester – which slashed SNAP/food stamps, Medicaid, the Affordable Care Act, federal employee benefits, the Child Tax Credit and other services.  House leaders said they would not do anything else, and would await action by the Senate.

The Senate was stymied by the fact that legislation can be held up by a minority, requiring 60 votes to pass most bills.  A sequester-replacement plan could not pass without bipartisan support, and it was not forthcoming.  Senate Democrats, led by Majority Leader Harry Reid (D-NV), Budget Chair Patty Murray (D-WA) and Appropriations Chair Barbara Mikulski (D-MD) developed the American Family Economic Protection Act (S. 388), which increased revenues by increasing taxes on millionaires and closing certain corporate loopholes, reduced farm supports, and made Pentagon cuts more gradual, while eliminating all the slated domestic cuts.  Senate Republicans introduced their version of sequester replacement (S. 16), which gave the President until March 15 to come up with other ways to cut $85 billion, without shifting cuts from domestic areas to the Pentagon or raising revenues, and giving Congress the opportunity to object to the President’s proposals.  Both bills were unable to overcome the hurdle of cutting off debate in order to get to an actual vote on the legislation when Congress took them up on February 28.  The vote to cut off debate on the Democrats’ bill was 51-49, 9 short of the 60 needed.  No Republicans supported moving forward with this bill; 3 Democrats also opposed it:  Hagan (D-NC), Landrieu (D-LA), and Pryor (D-AR).  In addition, Majority Leader Reid voted no in order to preserve the right to bring the bill up again.  The other three Democratic opponents objected to the reduced farm payments and/or some of the tax provisions.  The Republican alternative had far less support, with its own caucus divided about it.  It failed 38-62, with 9 Republicans voting “no” and 2 Democrats – Baucus (D-MT) and Warner (D-VA) – voting “yes”.  Republican opposition tended to center on seeing the bill as ceding legislative power to the President.

No Government Shutdown Now Expected Over FY 2013 Appropriations.  The House of Representatives plans to act on legislation during the week of March 4 to approve appropriations for the rest of the fiscal year (through the end of September).  It will start with the $1.043 trillion cap for total appropriations, as already established by Congress, and then subtract the domestic discretionary portion (some of the cuts are to mandatory programs) of the $85 billion in sequestration cuts, resulting in a $974 billion bill.  That is the level of funding the House had sought for FY 2013 appropriations last spring, but at that time was successfully opposed by the Senate and Administration.  The plan assembled by House Appropriations Chair Harold Rogers (R-KY) is expected to continue existing funding levels for most parts of government through an extended Continuing Resolution (C.R.), but to enact separate two full appropriations bills for Defense and Military Construction-Veterans Affairs.

The Senate Appropriations Committee is also at work on completing FY 2013 funding, but Chairwoman Mikulski (D-MD) is preparing an Omnibus bill.  Instead of extending mostly level funding in a Continuing Resolution, an Omnibus bill would incorporate 12 separate detailed appropriations bills.  These differences between the House and Senate approaches complicate the efforts to agree on final legislation.  Since Congress has a recess period scheduled for the week of March 25, the House and Senate must agree on the appropriations package by March 21 or 22.

While the President had previously stated he would veto any appropriations bill that was less than the $1.043 trillion cap, over the weekend he clarified that he would not veto a bill that encompassed the sequestration cuts.  Bipartisan comity is not easy to find, but it does extend to a reluctance to risk a government shutdown.

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