Bloomberg News

Budget Deal Opens ‘Age of Austerity’ for Federal Agencies

March 23, 2013

Congress Quick-Fix Budget Only Dulls Pain of $85 Billion in Cuts

Sen. Richard Burr, right, talks with Sen. Richard Shelby, R-Ala., as they ride an escalator on Capitol Hill in Washington, on March 22, 2013, as lawmakers rush to the Senate floor to vote on amendments to the budget resolution. Photographer: J. Scott Applewhite/AP Photo

The spending bill Congress passed shows $1.2 trillion in budget cuts that weren’t supposed to happen are now part of the political landscape.

Lawmakers approved the so-called continuing resolution March 21 averting a government shutdown while giving a handful of agencies more flexibility to meet the mandated reductions under sequestration.

Yet the budget ax still cuts deep: $85 billion this fiscal year in across-the-board reductions, forcing agencies to curtail services and lay-off or furlough employees. The cuts were designed to be so onerous Congress wouldn’t let them happen. Now some analysts say they may be enshrined in budget negotiations.

Slideshow: Sequestration Nation: Who's Going to Feel the Cuts?

“The age of austerity is here because Congress didn’t really produce a meaningful change in the budget cuts,” Darrell West, director of the Brookings Institution, a Washington-based public policy group, said in an interview. “Most of the government is going to be on a serious diet going forward.”

President Barack Obama and congressional Republicans agreed to sequestration -- cuts of $1.2 trillion equally split between defense and nondefense programs over the next decade -- as the penalty for failing to agree on a long-term deficit reduction strategy.

‘Didn’t Work’

In the weeks before sequestration took effect on March 1, Obama had warned the cuts would hurt the military and shut campgrounds at popular national parks, delay travelers at airports and cut safety inspections at food plants.

“The administration and military leaders pounded the ways these cuts are unacceptable and damage national security, and it didn’t work,” Todd Harrison, a defense analyst at the Center for Strategic and Budgetary Assessments in Washington, said in an interview. “The evidence is that Congress didn’t believe them or didn’t care.”

The stopgap spending bill that keeps the lights on for government agencies does seek to minimize the worst effects of sequestration by adding money to critical accounts, including the Pentagon’s operations and maintenance budget. In effect, cuts are being made from a bigger base.

Richard Kogan, senior fellow at the Center on Budget and Policy Priorities and a White House Office of Management and Budget official in the Obama administration, said the spending bill “provides a more reasonable starting point” to make the reductions.

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That will reduce some of the impact of the cuts, he said.

22 Weeks

The Pentagon planned to save as much as $5 billion this year by requiring unpaid leave for one day a week, the equivalent of a 20 percent pay cut, for as long as 22 weeks. After the spending measure passed, the Defense Department said it would delay furlough notices for two weeks.

“This is a brief pause to see if there’s some lesser number of days for people to be furloughed,” Army Lieutenant Colonel Elizabeth Robbins, a Pentagon spokeswoman on budget matters, said in an interview.

Even so, she said, “there’s no scenario we can think of where the furloughs will be zero.”

Some budget experts said as the public feels more of pain from sequestration, pressure may grow on lawmakers to plug budget holes.

‘Real’ Damage

“These cuts are still not a sensible way to solve the problem,” said Daniel Gordon, associate dean for government procurement law studies at George Washington University in Washington. “The damage is real.”

“It’s a fiction to believe the employees of the federal government don’t provide services,” Kogan said.

If Americans don’t feel much pain, however, proponents of less government spending in Congress are likely to emerge with a stronger hand in budget negotiations, Harrison said.

“If you don’t have a big outcry by June or July, when this will be fully in effect, then this lower level of funding is going to stick,” Harrison said.

Gordon Adams, who managed the national security budget at the Office of Management and Budget for President Bill Clinton, said the administration might have overplayed its hand by exaggerating the ill effects of the budget cuts.

The Pentagon, for example, “has been a little dramatic on the furloughs,” he said. “The Defense Department went for blunderbuss.”

Lawmakers said changes approved in the continuing resolution will help on the edges.

Bucket Drop

Congress provided money “in the places they wanted it to begin with,” so the Pentagon won’t be “having to move it around” to make the cuts, said Senator Carl Levin, a Michigan Democrat and chairman of the Senate Armed Services Committee.

The Pentagon’s extra flexibility is helpful yet “it’s a drop in the bucket compared to the cuts they are facing,” said Arizona Senator John McCain, a top Republican spokesman on defense issues.

Other agencies besides the Defense Department benefit, too. The continuing resolution shifts $55 million to the Agriculture Department’s Food Safety and Inspection Service to help it avoid pulling inspectors from meatpacking plants, which can’t operate without daily federal oversight.

First-term Republican Senator John Boozman of Arkansas, home state for Tyson Foods Inc (TSN)., the largest U.S. poultry producer, said he is relieved that the USDA won’t have to furlough the inspectors.

Poultry, Beef

“Everyone agrees that a major problem that we’ve got is the uncertainty with the economy,” he said. “You can imagine the poultry, the beef people not knowing if the inspectors are going to be there or not, that really does affect the economy.”

An additional $250 million will be added to the Women, Infants and Children program, under the bill, providing nutritional assistance to low-income mothers. The WIC program had been reduced by about $350 million.

The National Institutes of Health, the government’s medical research arm, got $71 million in added funding. The agency still must cut $1.5 billion under sequestration.

Congress hasn’t done enough to minimize the effects of sequestration, said Iowa Senator Tom Harkin, a Democrat who chairs the Senate’s Health, Education Labor & Pensions Committee.

“We don’t have flexibility in most of the programs that go to the disadvantaged,” he said.

“Everything is just on autopilot,” Harkin said.

To contact the reporter on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net

To contact the editor responsible for this story: David Ellis at dellis5@bloomberg.net


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