Barring a last-minute broadening of their legislative ambitions, congressional leaders struggling toward a minimalist deal on the fiscal cliff appear poised to allow the dreaded tool of sequestration to chop agency budgets when federal workers return from the holidays on Jan. 2.
Many long assumed it would never happen.
The Obama administration, after months of forbidding agency managers from overt planning for across-the-board cuts, finally relented early in December, beginning with the Defense Department on Dec. 5. And though layoffs, furloughs and canceled contracts are possible in the coming months, agencies have the tools to postpone action for several weeks in the hope that a new Congress in January could achieve a political and budgetary breakthrough.
Hence the Office of Personnel Management on Dec. 28 put out word that all employees should report to work on Jan. 2, that any plans for furloughs would unfold over at least 30 days and that the budget reductions will impact different agencies differently. On Dec. 20, guidance went out to employees at the Defense, Agriculture and Interior departments, as well as NASA, saying furloughs were not imminent.
On Dec. 26, Treasury Secretary Timothy Geithner notified Congress that the government will hit its statutory debt ceiling by Dec. 31, though the Treasury Department can take actions to extend its borrowing authority for several weeks.
Under the 2011 Budget Control Act, a failure of Congress to arrive at a budget deal cutting $1.2 trillion in spending over 10 years means automatic cuts of about $109 billion in fiscal 2013. The cuts would be especially painful next year because agencies would have only nine months to enact them.
Sequestration would impose cuts of 9.4 percent in nonexempt defense discretionary funding and 8.2 percent in nonexempt, nondefense discretionary funding. Domestic cuts of some $38 billion would affect everything from the Capitol Police to the Merit Systems Protection Board to the Interagency Council on Homelessness. The Congressional Budget Office has warned that such cuts -- combined with automatic tax hikes that kick in Jan. 1 -- could slow economic growth and cause a new recession.
Cuts or freezes in federal pay and benefits, though clearly part of the lawmakers’ horse-trading for new legislation, are not affected by the sequestration required by current law.
Among the many in government who are alarmed are leaders of the Internal Revenue Service. IRS Acting Commissioner Steven T. Miller has warned lawmakers that a failure to extend certain tax provisions that expire Dec. 31-- particularly those involving the alternative minimum tax -- threatens more than 60 million taxpayers with tax hikes and would delay tax filing season. “Inside the IRS, he said, “the changes to the tax credit ordering rules that result from a lapse in the AMT patch are highly complex and cut deeply into the core tax processing logic of IRS’ critical filing season technology systems.”
But the more frightening numbers that have been calculated are those describing the impact on government over the long term.
At the National Park Service, sequestration could impose the equivalent of closing nearly 200 parks and losing 9,000 seasonal rangers and other staff positions, according to the National Parks Conservation Association.
Defense Secretary Leon Panetta has warned that the department could send out 800,000 furlough notices, Sen. Lindsey Graham, R-S.C., said on Fox News Sunday.
Defense sequester cuts would “severely constrain resources for housing, training and equipping the troops,” according to an October letter to fellow lawmakers from Rep. Norman Dicks, D-Wash., ranking member of the House Appropriations Committee. It would “slow plans to modernize the helicopter fleet, impair the fielding of electronic warfare capabilities, make it more difficult to avoid a carrier-based strike fighter shortfall, slow efforts to field new surveillance aircraft, and disrupt the schedule of military space launches,” he said.
The Homeland Security Department would lose more than 24,500 jobs, including 3,400 Border Patrol agents; 3,400 Customs and Border Protection officers; and 7,200 Transportation Security Administration officers, according to Dicks' analysis.
The Federal Aviation Administration would lose 2,200 air traffic controllers, technicians and support staff. This likely would reduce the number of flights per day, the Dicks letter said, and delay the NextGen air traffic control modernization program.
The Justice Department would eliminate 7,500 positions, including 3,000 from the FBI; the Drug Enforcement Administration; and the Bureau of Alcohol, Tobacco, Firearms and Explosives; as well as U.S. marshals and 1,000 attorneys. At the Commerce Department, the National Weather Service would be saddled with a “significant weather data gap of two to four years from [a] polar-orbiting satellite, putting American communities at greater risk of major weather events,” the letter predicted. There would be cuts in clean water and safe drinking water funds, and 110 new local agreements would not be executed, jeopardizing as many as 10,780 new jobs in building water infrastructure.
Cutbacks in financial regulation, according to the letter, would delay enforcement examinations with the Securities and Exchange Commission and stall implementation of the 2010 Dodd-Frank Financial Reform Act.
In health care, sequestration cuts would result in 2,400 fewer National Institutes of Health research project grants awarded, and 1,600 fewer National Science Foundation research and education grants supporting 19,300 researchers, students and technical support staff.
Contractors may face some delays in payments or demands for scaling back or renegotiating past awards. The Professional Services Council, a contractor trade group, said in an analysis that the government has a wide range of options available to achieve the spending reductions, including changes or terminations to existing contracts. But the group is doubtful such contract changes would occur immediately on Jan. 2.
Federal employee unions this month have continued their protests against sequestration. “Millions of federal employees across America do not know whether they will have a steady job, a reliable retirement, and fair pay to come back to when all is said and done with the fiscal cliff negotiations," said National Federation of Federal Employees National President William Dougan in a Dec. 20 statement. "Employees are not a line item on a budget -- they are real people with families to feed and bills to pay. Federal workers cannot be forced to continue picking up the tab for Washington’s fiscal mistakes.”
An equally urgent plea came from Aerospace Industries Association President and CEO Marion C. Blakey. "We know congressional leaders know the consequences of sequestration," she said. "It would be a grave dereliction of duty to drop fixing it from a fiscal cliff bill. We can't believe they would fail our military and our economy like that. …Our elected leaders must come up with a solution to sequestration -- 2.14 million American jobs depend on it.”