Updated at 2:42 p.m. ET: In the Budget Control Act of 2011, President Barack Obama and Congress created a fail-safe device intended to spur agreement on a “grand bargain” of spending reductions and tax increases. The law, enacted as part of an escape from a potential debt limit crisis, created the famous “super committee” of 12 members of Congress which was assigned the job of devising entitlement and tax reforms which would reduce deficits by $1.5 trillion over ten years.
But the law included a default option: if the committee failed in its mission, then automatic spending cuts, called “the sequester,” would begin.
The Daily Rundown's Chuck Todd reports on President Barack Obama's budget plan.
Neither Obama nor most congressional Republicans were happy with the prospect of automatic spending cuts, but once the president put his signature on the bill, those cuts were built into the law. Congress, of course, was free at any point to enact a new law to undo the cuts, but so far it hasn’t done so. Now that the cuts are less than a month from beginning, Obama is again warning of their effects.
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In his statement Tuesday he called them “massive automatic cuts” and “deep, indiscriminate cuts to things like education and training, energy and national security” which he said “will cost us jobs, and it will slow down our recovery.” A few minutes later for emphasis he repeated the phrase “indiscriminate cuts.”
On Saturday Deputy Defense Secretary Ashton Cater, in a speech at an international security conference in Munich, called the imminent cuts “huge and reckless” and said they would cause “devastating damage to the military.”
Nowhere in Obama’s statement Tuesday did he mention the exact dollar amount or percentage amount of the cuts that are slated to begin on March 1.
So how big are they? And are they “indiscriminate?"
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To answer the second question first: in one sense, the cuts are not indiscriminate.
The Budget Control Act does in fact discriminate between entitlement programs, such as Social Security, in which benefit payments are automatically made to those people eligible for them, and what are called discretionary programs, such as the spending on the National Institutes of Health, the Federal Aviation Administration, or the National Park Service, which receive annual appropriations that can go up or down each year depending on the decisions of Congress.
For the most part, the cuts in the BCA exempt the entitlement programs: Grandma’s Social Security check is exempt, as is Uncle Pete’s veterans benefits check, but spending on NIH cancer research and on Zion National Park in Utah, for instance, is not.
As the Bipartisan Policy Center explained in a report last year, “The specified exemptions include Social Security, federal (including military) retirement programs, veterans benefits, Medicaid, and a host of other programs (mostly those benefitting individuals with low incomes). Furthermore, while Medicare would be subject to the sequester in the form of provider payment cuts, those cuts could not exceed two percent.”
But in another sense the cuts are indiscriminate in that they do not eliminate specific redundant or inefficient programs. The cuts are across-the-board to every federal department.
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President Barack Obama makes a statement during a press conference at the Brady Press Briefing Room of the White House February 5, 2013 in Washington, DC.
How big will the cuts be in the current fiscal year?
Keep in mind that the current fiscal year, FY2013, began on Oct. 1 so Obama administration officials will have to implement 12 months’ worth of cuts in only seven months.
The Congressional Budget Office said in its annual budget forecast Tuesday that the automatic cuts will reduce spending by $85 billion in FY2013.
Even with the cuts taking effect, total federal spending will still be more than $3.5 trillion, a higher total than in FY2012. At 22.2 percent of gross domestic product in the current fiscal year, federal spending is high by the standards of the past 50 years. The 50-year spending average is 21 percent of GDP.
At the end of the Clinton presidency, a time which many people see as one of prosperity and when in fact there was a budget surplus, federal outlays amounted to only 18.2 percent of GDP. That’s partly because the economy was thriving, so the federal share of it was smaller than it would have been otherwise. When the economy is sluggish as it is today, federal spending – much of it automatic cash transfers in the form of entitlement spending – is relatively larger than it would be if the economy were flourishing.
The automatic cuts mandated by the Budget Control Act will reduce defense spending (other than spending for military personnel) by about 8 percent and non-defense discretionary spending by between 5 percent and 6 percent in FY2013, the CBO said Tuesday.
Members of Congress in both parties – especially those with military bases in their states or districts – have voiced alarm about the effect of the defense cuts. At last week’s confirmation hearing for Obama’s defense secretary nominee Chuck Hagel, Sen. Kay Hagan, D-N.C. told Hagel, “Stopping sequestration from occurring is very important to me. North Carolina -- we have seven military institutions -- installations, and we have over a hundred thousand active-duty service members in my state.”
The BCA cuts, she said, “are going to harm our national security, will impair our readiness, will defer necessary maintenance that will help keep our troops safe and delay important investments in research and procurement as well as stunt our economic recovery at this time.”
Hagan was one of 74 senators voting for the BCA in 2011.
At a press conference at the Capitol Wednesday at which Republican members of the House and Senate Armed Services Committees offered a proposal to avert spending cuts by means of cuts in federal civilian employee head count, Sen. Lindsey Graham, R- S.C. said, “We have our fingerprints as Republicans on this proposal, on this sequestration idea. It was the president’s idea, according to Bob Woodward’s book, but we as the Republican Party agreed to it. We got into this mess together and we’re going to have to get out together….. To the president: we bear responsibility as Republicans for allowing this to happen. Lead us to a better solution.”
Graham was one of the 26 senators who voted against the BCA in 2011.