Senior Advisor for Federal Fiscal Policy
Senate Republican Whip John Kyl (R-AZ) and six other senators last week proposed to cancel the automatic $109.3 billion “sequestration” (spending cut) scheduled for January 2013 because of what they call its “draconian” defense cuts. (Their bill is nearly identical to a House bill [HR 3662] that House Armed Services Committee Chairman Howard P. “Buck” McKeon [R-CA] introduced on December 14.) But, the bill (S. 2065) would offset the cost of cancelling the 2013 cut by expanding the cuts for 2014 through 2021 from $109.3 billion each year to about $125 billion — making those cuts even larger than the 2013 cut that they view as unacceptable.
The 2013 cuts represent the first stage in the Budget Control Act (BCA)’s sequestration process to cut deficits by $1.2 trillion in 2013 through 2021. Half of the cuts each year will occur in defense and half in certain nondefense programs, both discretionary and mandatory.
The 2013 cuts will reduce that fiscal year’s funding for defense and nondefense programs each by $54.7 billion. (The nondefense cuts consist of $38.6 billion in cuts to discretionary programs and $16.1 billion in cuts to mandatory programs, about two-thirds of the latter in cuts to Medicare provider payments.) For subsequent years, the cuts will come from lowering the funding caps that the BCA set for defense and nondefense discretionary funding and from further cuts in mandatory spending.
While eliminating the scheduled cuts for 2013, the legislation would expand the required cuts for 2014 through 2021 by $127 billion: $46 billion in new defense discretionary cuts and $81 billion in new nondefense discretionary cuts. (The BCA’s nondefense mandatory cuts for 2014 through 2021 would remain unchanged.) Thus, the cuts in defense discretionary funding in 2014 would grow from $54.7 billion to $59.7 billion and in nondefense discretionary funding from $38 billion to $48 billion. The impact in subsequent years would be similar.
The legislation would also extend a 2012 pay freeze for federal employees for two more years and cut the federal workforce by 5 percent. Not only are these policies ill-advised, given the need for an effective federal workforce, but — contrary to claims by the bill’s sponsors — they do not offset the cost of cancelling the January 2013 cuts. That’s because the savings in the legislation come from reducing the discretionary caps by an additional $127 billion over eight years (and Congress will likely need to limit federal personnel costs simply to comply with the caps already in effect for 2014 through 2021).
This legislation would simply lead to further cuts in discretionary programs in 2014 through 2021 — and a further weakening of those programs’ ability to meet national needs.