The Obama administration’s “OMB Report Pursuant to the Sequestration Transparency Act of 2012,” released last Friday (September 14, 2012), outlines the “devastating” and “deeply destructive” impacts on virtually all aspects of the federal budget that will take place if Congress does not act to prevent about $109 billion in automatic across-the-board budget cuts from occurring at the start of 2013. The Budget Control Act of 2011 (BCA) requires the cuts, known as sequestration, to take effect on January 2 unless Congress and the White House agree on a plan to reduce the budget deficit by $1.2 trillion through 2021. (The BCA gives the administration little leeway in determining which programs would be cut by more than others.) Overall, defense programs would be cut by 9.4 percent and discretionary domestic programs by 8.2 percent.
The Sequestration Transparency Act of 2012 (STA) (P.L. 112-155), which President Obama signed on August 7, required him to submit the report by September 7; the White House attributed its delayed release to the tight timeframe and the complexity of the issue. The 394-page report aims to spell out which programs will be cut if sequestration goes into effect. It contains breakdowns of exempt and non-exempt budget accounts, an estimate of the funding reductions that would be required across non-exempt accounts, and an explanation of the calculations in the report.
What it doesn’t contain is any definitive breakdowns of which federal “programs, projects, and activities” (PPAs) actually would be cut, and by how much. Although the report “provides preliminary estimates of the sequestration’s impact on more than 1,200 budget accounts,” including “a preliminary identification of all sequestrable and exempt budgetary accounts,” “preliminary” clearly is the operational word here. In addition, the report says next to nothing about implementation, and does not describe how federal agencies would be expected to make the required cuts.
Which PPAs will be exempt from sequestration? Most agencies’ working capital funds are largely protected; so are many of the accounts that support insurance and credit programs. Several DoD accounts are protected, at least in part, including Navy Operation and Maintenance, Army Operation and Maintenance and Procurement, and Air Force Research, Development, Test and Evaluation. Although most salaries and expenses are sequestrable, compensation for Senate and House members is exempt. Also exempt (fully or partially) are salaries for uniformed military personnel, the Veterans Affairs Department, the FBI, and the federal prison system. Some state and other grant accounts (such as State Medicaid Grants) are fully or partially exempt, while others (like DOT capital investment grants) are sequestrable.
The bottom line? While the report’s overview of which accounts will be exempt from sequestration is interesting, almost everything else in it could change, making it—at least from our perspective—a virtual non-event.