The battle of the fiscal cliff is over, but the war to stop sequestration rages on – and President Obama's decision that his new Secretary of Defense should be former Sen. Chuck Hagel, the Republican other Republicans love to hate, makes it even harder to get a deal/.../
"It's madness," echoed budget expert Todd Harrison, of the Center for Strategic and Budgetary Assessments in an earlier conversation with AOL Defense. "The fact that we set all of these up to occur within March is just madness – [and] completely self-inflicted. Something's got to give here to break the cycle of behavior that we're seeing."
How did we get here? The New Year's Day compromise avoided tax hikes on the middle class but punted on the other two parts of the so-called fiscal cliff: (1) the federal debt ceiling that limits what the government can borrow – which it technically has already hit – and (2) the automatic budget cuts known as sequestration. The Treasury will probably run out of room and gimmicks on the debt by March. The sequester, meanwhile, will begin to take effect March 1st, with a second phase of the automatic cuts following on the 27th – the same day the six-month continuing resolution now funding federal operations expires.
One slender silver lining is that the sequester will be somewhat smaller: $45 billion instead of $62, by Hale's estimates; $53 billion, by Harrison's. That's because the New Year's deal – formally called the American Taxpayer Relief Act of 2012 despite being passed on 1/1/2013 – not only pushed back the date of the sequester but cut its amount as well.
The details are mind-numbing – the mathematically faint of heart should feel free to skip this paragraph – but in essence the 2011 Budget Control Act set up a two-phase sequestration. I rely here heavily on Todd Harrison's patient explanation (as AOL Defense contributor Loren Thompson told me, "nobody is able to keep up with this but Todd"):
1) The first, larger tranche is what Harrison calls the "penalty sequester." Originally, this first phase would have taken effect Jan. 2nd – though actual implementation would have taken months – and whopped almost $110 billion out of the federal budget; half of that, $55 billion, would have come from budget function 050, which funds the Defense Department plus a few other odds and ends, so DoD would have taken a $52 billion cut.
2) But the BCA also reduced the budget caps that set maximum spending in various areas, a parliamentary device to prevent Congress from simply turning around and re-appropriating the sequestered funds. The initial "penalty" sequester would still leave budget function 050 above the cap, so a second "after-session" sequester would kick in to cut another $11 billion. The total cut from function 050: $66 billion. From DoD specifically: $63 billion.
To make everything as maddening as possible, the Jan. 1 deal made the penalty sequester to budget function 050 some $12 billion smaller but the after-session sequester $2 billion larger, for a net change of $10 billion. The bottom line is that sequestration will now cut an estimated $56 billion from function 050 and $53 billion specifically from DoD.
That's Harrison's calculation: Hale, however, comes in at a cut of $45 billion. "I don't know how they got to that," Harrison said, but it's possible that the DoD comptroller was comparing the post-sequestration spending level to what the Administration requested almost a year ago in its 2013 budget, a spending level that's $8 billion lower than what's actually in effect under the current continuing resolution.