Deep spending cuts are likely, lawmakers say, with no deal on sequester in sight

 

Alex Wong/Getty Images - “I think [the cuts are] more likely to happen. And I’m ashamed of the Congress, I’m ashamed of the president, and I’m ashamed of being in this body, quite frankly,” said Sen. Lindsey O. Graham (R-S.C.), an Air Force Reservist who has been working for months to develop a bipartisan plan to protect the Pentagon.

By Lori Montgomery,

Less than a month after averting one fiscal crisis, Washington began bracing Tuesday for another, as lawmakers in both parties predicted that deep, across-the-board spending cuts would probably hit the Pentagon and other federal agencies on March 1.
An array of proposals are in the works to delay or replace the cuts. But party leaders say they see no clear path to compromise, particularly given a growing sentiment among Republicans to pocket the cuts and move on to larger battles over health and retirement spending.
Adding to the sense of inevitability is the belief that the cuts, known as the sequester, would improve the government’s bottom line without devastating the broader economy. Though the cuts would hamper economic growth, especially in the Washington region, the forecast is far less dire than with other recent fiscal deadlines, and financial markets are not pressing Washington to act.
Cuts to the military and the defense industry remain politically problematic. But Tuesday, even some of the Pentagon’s most fervent champions seemed resigned to the likelihood that the cuts would be permitted to kick in, at least temporarily.
“I think it’s more likely to happen. And I’m ashamed of the Congress, I’m ashamed of the president, and I’m ashamed of being in this body, quite frankly,” said Sen. Lindsey O. Graham (R-S.C.), an Air Force Reservist who has been working for months to develop a bipartisan plan to protect the Pentagon.
“How do you go to somebody in the military who’s been deployed four or five times . . . and say, ‘For your good work over the last decade, we’re going to ruin the military; we’re going to make it harder for you to have the equipment you need to fight, and we’re going to reduce benefits to your family?’ ” he said.
Senate Armed Services Committee Chairman Carl Levin (D-Mich.) was only slightly more optimistic, saying there is a “real” threat that the sequester will strike in March. The odds, he said, are “probably even.”
As the deadline approaches, legions of corporate executives, nonprofit officials, mayors and governors are working the phones and trekking to Capitol Hill in hopes of securing a last-minute deal. Cuts to government contracts have already triggered layoffs, particularly in the defense industry. And agency officials are warning of mass furloughs of government workers that could delay medical research, leave national parks understaffed for the peak vacation season and otherwise disrupt federal operations.
“A lot of people on the Hill see the oncoming train,” said Marion Blakey, president and chief executive of the Aerospace Industries Association, who led a delegation of chief executives to the Capitol on Tuesday. “We’re going to keep fighting this.”

Origins of the sequester
 
The sequester is a product of the 2011 fight over the national debt, when the new GOP House majority insisted on spending cuts equal in size to the increase in the federal debt limit. The result: spending caps that would force President Obama to slice $1 trillion from agency budgets over the next decade, along with $1.2 trillion in additional cuts that would hit automatically on Jan. 2, 2013, unless Congress agreed on a plan to replace them.
The sequester was designed to be abhorrent to both parties. With the exception of a few programs spared by Congress — including Medicaid, Medicare benefits and food stamps — every government account would be sliced by roughly the same amount. Many Republicans were queasy about a projected 9.4 percent reduction in military programs. And many Democrats were alarmed by the prospect of a 8.2 percent cut to Head Start, air-traffic-control operations and community development block grants.
Despite the threat, lawmakers riven by larger ideological differences over taxes and spending have not agreed on an alternative plan to generate $1.2 trillion in savings over the next decade. Late last month, in the throes of negotiations over the “fiscal cliff,” the White House and congressional leaders informed rank-and-file lawmakers that the sequester would kick in on Jan. 2.
That sparked a furious lobbying campaign by outgoing Defense Secretary Leon E. Panetta, who helped secure a deal to delay the sequester for two months. The White House and congressional leaders agreed to cover half of the $24 billion cost by reducing spending caps even further over the next two years; the other half would come from a tax gimmick that Democrats counted as new revenue.
The agreement eased the impact of the sequester. Instead of lopping nearly $110 billion from agency budgets this year, the cuts will amount to about $85 billion, according to a recent analysis by the Center on Budget and Policy Priorities. Most Pentagon accounts would drop by 7.3 percent, the analysis said, while most domestic agencies would lose 5.1 percent.

Digging in on both sides
 
But the agreement did little to pave a path for further compromise. Indeed, Obama is now insisting that any fresh debt-reduction measure be evenly balanced between spending cuts and new tax revenue.
On Tuesday, Senate Majority Leader Harry M. Reid (D-Nev.) said Democrats will push to replace the sequester “in short increments” of a few months at a time. But any proposal, he said, “should be a balance of spending cuts and revenue.”

Republicans have ruled out further revenue, saying they will give Obama no more than the roughly $600 billion in new taxes on wealthy Americans that he won in the fiscal cliff talks. Instead, House Budget Committee Chairman Paul Ryan (R-Wis.) said Sunday on NBC’s “Meet the Press” that Republicans will let the sequester kick in, making it easier for them to persuade conservatives to keep the government open when the current funding bill expires March 27.
The sequester “is the only cuts we’ve got right now,” said Sen. John Cornyn (Tex.), the No. 2 Republican in the Senate.
That would clear the legislative decks for a broad ideological fight centered on a budget framework for 2014. Obama is due to deliver his budget request for the coming fiscal year in early March, with Ryan and Senate Democrats expected to follow with their blueprints in the weeks thereafter.
But there is deep anxiety in both parties about how to proceed. In the Senate, Finance Committee Chairman Max Baucus (D-Mont.) is resisting calls from Democratic leaders to raise additional revenue through tax reform. “That has to be resolved,” Baucus said.
And in the House, some veteran GOP lawmakers worry that Ryan’s pledge to wipe out deficits over the next decade will produce a budget so austere it cannot win approval, even among House Republicans — sparking a new internal crisis just as Congress faces its next deadline for raising the federal debt ceiling sometime this summer.