Blog Post: Sequestration Through a Glass Darkly, More Darkly than Ever
August 2, 2012
In the interest of time…
This area of the NDBI website will be devoted to short analyses of current Defense Department business issues.
Sequestration Through a Glass Darkly, More Darkly than Ever
Yesterday, Acting Director of the Office of Management and Budget OMB Jeffrey Zients and Deputy Secretary of Defense Ashton Carter went to Capital Hill to shed light on how, if it happens, sequestration would be applied. The result was anything but enlightening. The question of how OMB was going to allocate the reductions to the domestic and defense discretionary funding went unanswered. What did happen was an exchange of accusations regarding who was at fault and why wasn’t Congress increasing taxes to avert sequestration, like the President wants.
Instead of Zients and Carter explaining how the Administration was going to apply sequestration, the two Administration representatives explained how every budget line item, program, project and activity would be cut by an equal percentage. They talked about how terrible the sequestration ceiling-forced reductions will be using words like “disastrous.” More revealing than his Hill testimony was Zients’ memorandum to the Heads of Executive Departments and Agencies sent July 31, 2012. Basically, what the memorandum says that agencies should look to the appropriate sections of the Balanced Budget and Emergency Deficit Control Act of 1985 for guidance on how sequestration would be applied.
What we do know is that Military Personnel in both the base budget and in the Overseas Contingency Operations account will be exempted. But, procurement, research and development, operations and maintenance and all other funding within the defense budget will not. Exempting some accounts means that the ceiling will force a greater percentage in funding reductions for the other spending categories.
Two factors create more uncertainty. First, it was revealed during this hearing that all un-obligated funds from prior years that were going to be spent in FY2013 are also included under the sequestration ceiling. So, if an agency had planned to spend appropriated funds that had not been obligated yet, those funds would also be reduced. Programs that were planned to use funding in a measured fashion to execute according to plan in many cases will be in serious jeopardy performing inefficiently, or being canceled.
Second, the Senate and House majority leaders have agreed on a stopgap-spending plan for the FY2013 budget. To avoid shutting down the government, Senate Majority Leader Harry Reid and Speaker of the House Boehner have agreed to a six-month continuing resolution to fund the government until April 2013. Normally, Congress doesn’t admit that they can’t or won’t do their job of agreeing on a budget until the eleventh hour on September 30, the end of the fiscal year. This year they are conceding failure early. If it were any other year, most reactions would be “ho, hum, what’s new?” But, this year sequestration loom as huge wild card on the horizon.
A Continuing Resolution or CR is a limited appropriations measure that stipulates that spending may go on, but a level equal to that of the previous year. Additionally, while the CR is in place no new programs may be started. However, the previous year FY2012 was base on an appropriation of $530.6B and the Senate Appropriations Defense Subcommittee just passed an FY2013 spending bill of $511.2B. On the House side, the base budget, spending bill that was passed was $518B. What is important is that both of the bills are less than the spending level of FY2012.
Now, enter sequestration (remember, I don’t believe it will happen, but say it does) in January of 2013. The Defense Department has been spending at a 2012 level, which is higher than the FY2013 level when sequestration is applied. Which legislation takes precedence, sequestration based on the Budget Control Act of 2011, or the Continuing Resolution passed before the end of the FY2012 Fiscal Year.
Is it any wonder, that most Americans and worse yet most defense contractors are truly confused by what’s going on in Washington?
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