The Math Behind the Sequester

Photograph by Daniel Acker/Bloomberg

A hull section of a U.S. Navy Littoral Combat Ship (LCS) sits in a paint booth during a facility tour in Marinette, Wisconsin, on Feb. 11, 2013.

From Bloomberg Government’s Congress Tracker blog

How much is “brutal”?

Lawmakers agree that the automatic spending cuts slated to begin March 1 will be big and painful — President Barack Obama yesterday called them “brutal” — though exactly how big and painful is enough to test anyone’s math skills.

The White House Office of Management and Budget estimated in September that allowing the across-the-board cuts to take effect would result in a 9.4 percent cut in defense discretionary spending, an 8.2 percent cut in the non-defense discretionary budget and a 7.6 percent cut in non-defense mandatory expenditures.

At that point, though, the sequester was expected to be $110 billion. Lawmakers have since reduced the cuts, as part of last month’s fiscal-cliff deal, to $85 billion, drawn equally from defense and non-defense.

Lawmakers further diluted the non-defense cuts when they approved a $30 billion extension of unemployment benefits as part of the cliff deal and, later, when they passed $60 billion in Hurricane Sandy-related aid. Most of that money is now sequester-able, which means that the total amount of non-defense spending subject to the cuts is larger and reductions can be spread across more programs.

While the White House budget office hasn’t finalized its calculations, OMB Controller Daniel Werfel told lawmakers last week that the agency now expects the sequester to cut non-defense programs by “roughly” 5 percent and defense by “roughly” 8 percent — which is less than OMB predicted in September.

Caution: All of those figures are compared with an entire year’s budget. The sequester will be coming five months into fiscal year 2013, so the cuts will feel bigger —  more like 13 percent for defense programs and 9 percent for non-defense programs, Werfel said

And if that’s not complicated enough, if an agency has prepared for the cuts by pinching pennies  — perhaps by taking its time to dole out grants or allowing vacancies to remain unfilled — it will have more money in the bank when the sequester hits. That would make it a little easier for that agency to absorb any cuts. It also makes the predictions of actual impact a little tricky right now.

When will we know some solid numbers? March 1, unless there’s a last minute deal.

What do you think about this article? Comment below!