Will new budget negotiations unravel the sequestration riddle?

Tuesday - 10/29/2013, 3:12pm EDT

For the first time since the government shutdown ended two weeks ago, lawmakers are sitting down at the table to negotiate over the fiscal 2014 budget.

A bipartisan House-Senate budget conference committee met Wednesday to begin discussing how to avert a second year of automatic, across-the-board spending reductions from going into effect.

Democrats and Republicans have remained at odds over how to account for the sequester cuts in their respective spending plans. But even though formal budget negotiations have now commenced, experts and insiders are throwing cold water on any notion of a comprehensive budget accord, or so-called "grand bargain," that would see the cuts repealed or replaced.

What does that mean for federal agencies, managers and employees? Sequestration is likely to stick around — at least in some form — and about the best agencies can hope for is a small-bore deal that grants them some greater flexibility in implementing the cuts, these experts said.

"Managers have to at least recognize the possibility that the second round of automatic cuts may kick in and that they're unlikely to be able to recover what they have lost through the first round," said Don Kettl, dean of the University of Maryland's School of Public Policy. "But they may have more flexibility in figuring out how to allocate it. And beyond that, who knows what deal may be made?"

Grand bargain? Forget about it

The experts are clear on one front. The possibility of a "grand bargain" on the budget, giving agencies long-term certainty over the direction of federal spending, is highly unlikely.

(Story continues below chart)

2014 Funding Levels


Current levels
(after sequester)

2014 - BCA caps

2014 - BCA caps
(after sequester)

Defense $518 billion $552 billion $498 billion
Nondefense $468 billion $506 billion $469 billion
Total $986 billion $1.058 trillion $967 billion
Source: Center on Budget and Policy Priorities

Budget experts and members of the committee, themselves, are downplaying any talk of a comprehensive budget deal.

"I don't think much is going to come out of this at all," Stan Collender, a partner with Qorvis Communications, told Federal News Radio. "No matter what happened with the shutdown and the debt ceiling almost-debacle, the basic issues about the budget continue to remain, and that is that Republicans don't want to raise taxes and Democrats don't want to cut entitlement programs. And that only leaves one other area of the budget to look at and that, unfortunately, is appropriations where most federal agencies and employees get dollars to spend."

For much of the year, Democrats and Republicans have remained at odds over how to account for sequestration in fiscal 2014 and are billions of dollars apart from a compromise.

In their spending blueprint, Senate Democrats have called for replacing sequestration outright with alternative cuts and tax increases, allowing spending to remain at about $1.058 trillion. The House Republican budget lowers spending to $967 billion, the level allowed for after a second round of sequestration, although it shifts funding to Defense to spare it from further reductions.

But Collender pointed to even more fundamental disagreements about the overall purpose of the federal budget: Whether its focus should be on continuing to stimulate the stalled economy or to continue reducing the deficit.

"It's not a question of compromising between two people on the same playing field," he said. "It's not even clear they're in the same game, and that's what the problem's going to be."

Sequestration here to stay?

Such chasmic disagreement makes it unlikely that Congress will be able to come up with an alternative to sequestration's harsh budget-cutting mechanism.

"The real problem with the sequester is that everybody hates it, except everyone hates all of the alternatives even more," Collender said.

Kettl agreed that a continuation of sequestration seems likely, albeit with some adjustments to blunt its impact.

"In some ways, the most likely outcome of this may very well be locking into place sequestration that is scheduled to occur but to give agencies more flexibility in figuring out how to manage it," he said.

Collender agreed that that outcome is probably the "ultimate fallback" for Congress: Keep the sequester in place but make it a little less painful.

"One of the alternatives may be to ... allow both domestic and defense agencies a bit more flexibility so that they can determine priorities, and some things get more money and others get less as long as the top line stays the same," he added.