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Budget battles don’t end with sequester in effect

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The sequester kicked in on Friday night, meaning $85 billion in spending cuts will hit federal agencies and employees during the remainder of the fiscal year — slowly at first but with greater force over time.

Congress this week will begin to focus its attention on a March 27 deadline for adopting a new spending bill that would replace the last short-term funding measure, which expires on that date. Absent a deal, the government shuts down.

Lawmakers may try to scale back some of the sequester cuts as part of their negotiations, but President Obama indicated during a news conference on Friday that he won’t use the threat of a shutdown to demand fewer reductions.

“There’s no reason why we should have another crisis by shutting the government down in addition to these arbitrary spending cuts,” Obama said.

The House plans to vote Thursday on a resolution that would fund the government through Sept. 30 but keep the sequester in place and provide greater flexibility with how the military absorbs its $40 billion share of the 2013 reductions.

Neither the president nor Senate Democrats have threatened to block that proposal, but they want to negotiate greater flexibility with cuts on the domestic side, according to an article in Friday’s Washington Post.

The sequester is designed to last 10 years and reduce projected government spending by about $1.3 trillion.

Even if the president accepts the House plan and resigns himself to the 2013 cuts, he is likely to work toward undoing some of the reductions scheduled for the future.

“The president doesn’t believe in manufacturing another crisis, but we will still be committed to trying to find Republicans and Democrats that will work on a bipartisan compromise to eliminate, get rid of the sequester,” said Gene Sperling, chairman of Obama’s National Economic Council, on “Meet the Press” Sunday.

Once lawmakers deal with the March 27 deadline, they’ll have to pivot toward another front in the budgeting wars to decide how much money the nation can borrow. The government reaches its debt limit in mid-May under a plan adopted in January.

In the long run, Democrats are hopeful that they can convince Republicans to accept new tax revenue.

The president hinted during his State of the Union speech that he would accept some entitlement cuts in exchange for new revenue. Indeed, his last budget proposal called for Medicare reforms that would save an estimated $68 billion from the program over 10 years.

A few influential GOP lawmakers — namely Sen. Lindsey Graham (S.C) and Sen. Kelly Ayotte (N.H.) — have indicated they’d be willing to consider new revenue.

But Republican leaders such as House Speaker John Boehner (Ohio) and Senate Minority Leader Mitch McConnell (Ky.) have said they’re done raising taxes after the January “fiscal cliff” deal that called for more than $600 billion in new revenue.

House Republicans have approved a number of deficit-reduction bills that would pull back on federal spending by increasing retirement contributions from federal employees, reducing the federal workforce by 10 percent through attrition and freezing federal salary rates through 2015.

As for what happens next under the sequester, federal agencies will have to trim a combined $85 billion from their budgets, with the reductions affecting virtually every program and account.

A few exceptions will apply, mainly in areas of mandatory spending, programs that help the poor and all Veterans Affairs expenses. The list of exemptions includes Social Security benefits, the Earned Income Tax Credit and supplemental nutrition assistance for children of low-income families.

Administration officials have warned that the sequester impacts could be harsh, affecting everything from national security and border protection to food inspection and air travel.

Many agencies have said the cuts will require them to furlough their employees, and two of them, the National Labor Relations Board and the Justice Department, have already given workers the required 30-day notice of unpaid leave.

A few agencies have said they expect to meet their sequester targets without resorting to furloughs. Those agencies include the Government Accountability Office, the Architect of the Capitol, the Small Business Administration, the Smithsonian Institution and the U.S. Agency for International Development.

Union officials plan to meet with furloughing agencies to negotiate the terms of unpaid leave. Labor leaders have said they want employees to have as much say as possible over when the days off occur.

For more federal news, visit The Federal Eye, The Fed Page and Post Politics.

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