How the White House could soften the blow of the sequester

November 5, 2012

Officials have compared the sequester to taking a "meat ax" to the budget. But if it does take effect, there are ways that the executive branch might be able to mitigate the impact of the automatic, across-the-board cuts—if only for a few weeks.


(Haraz N. Ghanbari - AP)

OMB Watch, a nonprofit budget advocacy group, outlines a few of these strategies in a new report. None of them would reverse the impact of the entire sequester. But the group believes that the executive branch has a few tools at its disposal that it could deploy without Congressional approval that could buy policymakers some more time to strike a deal, arguing that it would be worth going over the cliff if Republicans refuse to accept higher taxes on the wealthy. 

"Those legislators who took the 'no new taxes' pledge may not be able to have a rational conversation about the budget until 2013," Katherine McFate, President and CEO of OMB Watch, said Friday in a statement. "If we can't get a deal until the new year, there are a number of ways to minimize the immediate impacts of automatic spending cuts while a responsible budget agreement is negotiated."

First, the group points out that the president's Office of Management and Budget has authority to accelerate spending for critical programs in 2013. While Congress determines agencies' budgets, it's up to the White House's budget office to actually hand out the money. So OMB could potential try to speed up funding for agencies to offset the sequester's cuts for a few weeks, to prevent a drop-off after Dec. 31.

That said, the author of the report, Patrick Lester, acknowledges that the full extent of this authority is murky. While OMB has the power under law to dole out the money as it "considers appropriate," it also must prevent funding from stopping abruptly before the end of it year. As such, "there is no way to know at this time whether OMB will choose to use its apportionment power to mitigate the impact of sequestration," the report concludes. (I asked OMB itself about its willingness to use apportionment but haven't heard back.)

Secondly, there are strategies that the individual agencies themselves could use to temporarily minimize the fallout of the sequester. Lester points out that federal agencies are already well-accustomed to dealing with budget uncertainties and shortfalls because of Congress' failure to pass full budgets on time. And they've regularly employed a few techniques to adapt.

Lester points out that some federal money that isn't spent in a given year is carried over, most of which goes to pools of money meant to be used over multiple years. On the non-defense side, agencies could use this money to replace funds lost by the sequester in the short-term, the report explains, as "unobligated balances carried over from prior years for defense programs are subject to sequestration, but unobligated balances for non-defense programs are not."

Agencies also can "reprogram" funds within a specific program, project, or activity to prioritize the most critical activities, as they routinely do to deal with budget turbulence. However, agencies can't transfer funds from one program to another without Congressional authorization, though this is an option that the Pentagon is considering "to protect major weapons programs from sequestration, possibly as much as $15-20 billion," the OMB Watch report says. 

Finally, military personnel are exempt from the sequester, and "for civilian personnel, Congress has given agencies authority to accelerate spending to prevent furloughs and layoffs," the report adds. (My colleague Zach Goldfarb reports on more measures that the White House could take to delay the tax hikes from taking effect as well.)

Fiscal cliff-jumpers are likely to welcome the report's findings as yet more proof that we're facing more of a "fiscal slope" with changes that will phase in gradually than a sharp drop-off with near-apocalyptic consequences for the budget and the economy. But these sequester-coping strategies would only make sense if it looked all but certain that Congress and the White House would ultimately find a way to replace or forestall the automatic cuts. And even a blunted sequester might not be able to  prevent the drop in market and economic confidence that could occur if other parts of the cliff take effect and there isn't a clear path toward resolution.

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