OMB, DoD remain mum on sequestration's impact on specific programs

Thursday - 8/2/2012, 6:09am EDT

Jared Serbu, DoD reporter, Federal News Radio

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For more than a year, the executive branch's position on sequestration when replying to questions from Congress has been doggedly consistent: the administration was not developing plans to implement the automatic budget cuts, but the results would be devastating.

That message underwent a subtle shift Wednesday when the Office of Management and Budget's acting director and the Defense Department's deputy secretary testified before the House Armed Services Committee: sequestration still would be devastating, but agencies now are developing fallback plans in case doomsday comes, and it's up to the legislative branch to avert disaster. Under the Budget Control Act, the government would have to reduce spending by $1.2 trillion over 10 years.

Jeff Zients, director, OMB

But if lawmakers attending Wednesday's hearing were expecting a detailed blow-by- blow account of what would happen if agencies had to implement those auto-piloted cuts, they were sorely disappointed.

Acting OMB director Jeff Zients told lawmakers it was impossible to deliver a list of which programs would be affected and which would not until Congress passes appropriations bills for fiscal 2013. Without those, budget analysts don't have a "denominator" they can rely on to implement the budget cuts mandated by last year's Budget Control Act.

Nonetheless, he told the committee that OMB would be ready to issue a sequestration order on Jan. 2, 2013, and agencies would have plans in place to implement that order if Congress doesn't come up with an alternative.

And for ill or good, the numerous recent 11th-hour budget impasses on Capitol Hill have given OMB and agencies plenty of opportunity to become experts in developing worst-case-scenario playbooks, he said.

"We've had government shutdown threats, we've had the debt ceiling situation. We know how to do this," Zients said. "But there are five months between today and Jan. 2. That's plenty of time for Congress to pass balanced deficit reduction, and it's more than enough time for us to be ready for having to implement the sequester. But that's not where the energy should be spent. Where the energy should be spent is trying to avoid sequestration, which everybody agrees would be bad policy."

Memo begins the planning stage

In advance of the hearing, the Obama administration issued guidance to agencies, telling them to start combing through each of their programs, projects and activities to determine which ones are exempted from sequestration by other parts of federal law. Those that aren't will face cuts of roughly 10 percent next fiscal year.

While Zients couldn't name individual programs, he did try to give lawmakers a flavor of what they could expect in their districts.

On the domestic spending side of the discretionary federal budget, 16,000 teachers would face job losses, 700,000 children and mothers would lose access to nutrition assistance programs and 100,000 children would lose their places in Head Start programs, he said.

"In addition, the FAA would face significant cuts in operations. Food safety and workplace safety inspections would be cut back," Zients said. "FBI agents, Border Patrol agents and transportation safety staff would decline. And the NIH would have to halt or curtail vital scientific research, such as research into cancer and childhood diseases."

On the defense side, the Budget Control Act — the law which created sequestration — leaves DoD with little flexibility about where to make its $55 billion share of cuts in 2013, said Ashton Carter, the deputy secretary of defense.

"I can describe many of sequestration's impacts on DoD, but it's not possible to mitigate those consequences," he said. "The whole intent of sequester was to use the threat of cuts, implemented inflexibly and mindlessly, to force Congress to come up with a compromise deficit reduction plan. It was never designed to actually be implemented."

Protecting the warfighter from cuts

Nonetheless, under that scenario, each of DoD's 2,500-or-so programs would take an equally proportional share of the spending reductions, seriously disrupting defense activities and making the programs the department already has in place much less efficient, Carter said.

Ashton Carter, deputy secretary, DoD

"Some managers would be forced to buy fewer weapons, fewer articles," he said. "Reductions in buy sizes will cause unit costs to rise, which will in turn result in further cuts in buy sizes. In cases where we can't feasibly reduce the quantity of items bought, we would also have to delay projects, which is also economically inefficient. And many military construction projects would be rendered unexecutable. We'd be forced to delay fixing schools, defer construction of new medical facilities, delay cleanup and so-forth."

There are some important exceptions to the across the board cuts though. For example, the law gives the President the authority to exempt military pay accounts from the cuts, an option President Barack Obama decided to exercise this week. The tradeoff, however, is that the rest of DoD's accounts would have to absorb extra cuts to make up for that exemption.

Similarly, while the cuts technically apply to the overseas contingency operations budget which pays for the war in Afghanistan, Carter said DoD would strive to protect all warfighting operations.

Again though, that protection would come with a tradeoff, he said.

DoD's base budget and the contingency budget share many of the maintenance and operations accounts, so it's possible to shift the spending reductions to the non- war side of the Pentagon's budget ledger. But Carter said military forces would suffer additional harm in the form of reduced readiness for military units who are about to deploy, especially in the Army and Marine Corps.

"We'd seek to minimize the effects, but we probably couldn't do so fully. Later- deploying units would probably receive less training," he said. "We'd also have to reduce funding for civilian personnel. We would probably have to release temporary employees, impose a partial hiring freeze and impose unpaid furloughs on our civilians. You can imagine the effect on the output, not to mention the morale, of these defense employees."

Personnel services like commissaries and even health care for retirees and military families also would suffer, Carter said.

Despite reports that DoD's program managers already have made adjustments to contracting decisions as a preemptive move to prepare for sequestration, Carter said the phenomenon is not showing up in the regularly- updated acquisition data he sees, though he acknowledged he has heard anecdotal reports that it was happening.

Business-as-usual

Zients said OMB is directing the entire federal workforce to treat its spending activity as though it's business-as-usual. Even though the sequestration cuts are the law of the land at the moment, managers should assume sequestration won't happen when they're making day-to-day decisions.

"Agencies are instructed to continue their normal business operations," he said. "They need to continue to spend at the appropriate level so that they don't violate the anti-deficiency act, but at the same time not to slow down spending."

Carter said the OMB admonition is important, and that if it's not followed, DoD, other agencies and the companies they contract with would end up suffering from "self-imposed" effects of sequestration even if Congress ultimately agrees to undo the automatic cuts.

"We don't want to unnecessarily alarm employees by announcing adverse personnel actions or suggesting that those actions are likely," he said. "And for efficiency reasons, we don't want to hold back on obligating funds, either for weapons projects or operating programs that would have been obligated in the absence of a possible sequestration. We also don't want to hold back on training, which would harm readiness when we face a complex array of national security challenges."

Lawmakers and Zients took up at least half of the hearing with questions, answers and diatribes that were highly partisan, unusually so for an Armed Services Committee meeting, with Democrats and Republicans arguing over whose bright idea sequestration was in the first place and which party was responsible for the fact that Congress hasn't undone it yet.

While there are technically five months on the calendar for legislators to reach an agreement, translating that period into an election season Congressional schedule leaves precious little time to reach a deal. Lawmakers will be absent from Washington for most of August and September.

Armed Services Committee chairman Buck McKeon (R-Calif.) is worried.

"We have two legislative weeks left before we leave for the election and go home to tell people what a great job we're doing," McKeon said. "Then, we're going to come back into a lame duck environment with people who have lost their elections and working from desks down in the basement. Then we have to solve something that's very, very important that we haven't been able to solve for a year and a half. I'm frustrated with that. We have a responsibility to fix this. I just don't know how we're going to go about that."

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