Seven Myths About Sequestration Revealed

Budget cuts under sequestration begin Friday, March 1. Bloomberg Government’s extensive coverage during the past several months has debunked many misperceptions about squestration. In a new BGov Insight, BGov’s Senior budget analysts Robert Levinson and Cameron Leuthy identify the Big Seven: 

Myth #1: On March 1, about $85 billion will be cut immediately from government spending.

Fact: The president is required to issue an order on March 1 that reduces budgetary authority by $85.3 billion in defense and nondefense funds by Sept. 30, the end of the fiscal year. Only half the funds will be cut immediately, because the government is operating with half a year’s funding under a stopgap spending bill known as a continuing resolution. The other half of the cuts will be taken when funding is made available for the second half of the year.

Myth #2: Sequestration will suck $85 billion out of the economy by the end of the fiscal year.

Fact: Only about $42 billion of the sequestered funds would have been spent in fiscal 2013, according to the Congressional Budget Office. Money appropriated in one year often is spent in future years, so the impact of some cuts won’t be felt until fiscal 2014 and beyond.

Myth #3: Sequestration occurs every year through fiscal 2021, and it cuts the same amount each year for a total of $1.2 trillion.

 Fact: There are different types of sequestration under the Budget Control Act. The one that’s getting the most attention — and that will begin March 1 — is a one-time event for fiscal 2013. In succeeding years, the balance of the $1.2 trillion savings goal mandated by Budget Control Act is achieved primarily through caps on discretionary funding. Sequestration is triggered only if discretionary budgets exceed the caps. Mandatory spending, including Medicare, will also be subject to sequestration every year under the Budget Control Act.

Myth #4: Sequestration will cost thousands of government workers their jobs.

Fact: The government probably will furlough civilian employees, which amounts to unpaid days off. Federal agencies probably will avoid furloughs longer than 22 days because they fall under more burdensome “reductions in force” rules. Without extended furloughs or layoffs, much of the sequestration cuts will come from reductions in federal contract and grant spending.

Myth #5: Military personnel will be unaffected by sequestration.

Fact: The president has the authority to exempt military pay from sequestration, and he says he will exercise that authority. Still, many services for troops such as health care are paid from accounts that aren’t exempt. Some slowdown or reduction in certain services, as well as training, for troops is probable.

Myth #6: The cuts will be spread evenly across the government.

Fact: Defense spending will be cut by 7.3 percent and nondefense spending will be cut by 5.3 percent, according to Bloomberg Government estimates. Medicare cuts are limited to 2 percent. The Department of Veterans Affairs is exempt from cuts. The law requires that each program, project or activity in every agency be cut an equal percentage, but the definitions of these terms may vary across agencies. Agency leadership may have some discretion in applying the cuts.

Myth #7: After Friday’s sequestration, federal agencies, employees and contractors will finally have certainty about government funding.

Fact: Several major spending issues still must be dealt with in the near future:

– The president’s fiscal 2014 budget request, due Feb. 4, won’t be ready until mid-March.

– A government shutdown will occur after March 27, when the continuing resolution expires, unless a budget agreement is reached for the rest of the fiscal year.

– The debt ceiling, which was suspended by a Feb. 4 law, will be back in force in May, potentially triggering another showdown between congressional Republicans and the president.

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