Bloomberg News

Obama Inks 2013 Funding Bill Locking in Cuts He Opposes

March 27, 2013

President Barack Obama

The spending reductions undercut President Barack Obama’s push to increase funding for research, education and infrastructure, which he has said are necessary to bolster economic security for middle-income Americans. Photographer: Pete Marovich/Bloomberg

President Barack Obama signed into law a catchall government-funding bill that ends the 2013 budget fight and locks in $85 billion in spending cuts he opposes.

With Obama’s signature yesterday, day-to-day operations of cabinet departments and federal agencies will continue without interruption through Sept. 30, the end of the fiscal year. With the automatic budget cuts known as sequestration taking effect, the spending will amount to about $984 billion. The previous funding authorization was due to expire today.

The across-the-board cuts usher in a new “age of austerity,” said Darrell West, director of the Brookings Institution, a Washington-based public policy group.

The spending reductions undercut Obama’s push to increase funding for research, education and infrastructure, which he has said are necessary to bolster economic security for middle- income Americans. He continues to seek a deal with congressional Republicans that would include raising revenue through taxes along with making budget cuts.

“I don’t see how sequester, root-canal budgeting, co- exists with what I think is a robust investment agenda,” Jared Bernstein, former chief economist to Vice President Joe Biden, said in a telephone interview March 25.

“The only way out is finding offsets,” which involves cutting funds from one program to increase money for favored projects, he said.

Seeking Repeal

White House press secretary Jay Carney said at a briefing yesterday that “regular folks” are going to be harmed by the sequestration, and that Obama wants it repealed. “He hopes Republicans are going to go along with that,” Carney said.

Households are showing concern that the budget cuts will hurt growth. The Conference Board’s consumer confidence index slumped to 59.7 from a three-month high of 68 in February, data from the New York-based private research group showed yesterday.

Other indicators show businesses are looking past the budget battle. Bookings for goods meant to last at least three years rose 5.7 percent, the most since September, after a 3.8 percent drop the prior month, the Commerce Department said yesterday in Washington. Sales of new homes in February capped the best two months since 2008, and residential real-estate prices rose in January by the most since June 2006.

The Standard & Poor’s 500 Index (SPX) climbed 0.8 percent to 1,563.77 at the close in New York, within two points of its record. The benchmark has risen 9.6 percent this year.

Mandated Cuts

Congress mandated $1.2 trillion in across-the-board spending cuts spread over nine years as part of a 2011 deal to increase the U.S. debt limit. The cuts are intended to shrink the federal budget deficit, which has exceeded $1 trillion in each of the past four years.

The reductions were intended to be so onerous that Congress and the president wouldn’t let them occur and would come up with a plan to replace them. Democrats and Republicans now disagree over whether a substitute plan should include new tax revenue.

The measure Obama signed yesterday leaves intact $85 billion in across-the-board budget cuts for this fiscal year of 5 percent to domestic agencies and 8 percent for the Defense Department. It includes authority for some leeway to shift funds.

Partisan bickering over debts, spending and taxes for fiscal 2014, beginning Oct. 1, will resume after Congress returns from a two-week break. For now, supporters of the automatic cuts say they see victory.

‘Conventional Wisdom’

“It’s turning conventional wisdom on its nose,” said Mattie Duppler, director of budget and regulatory policy of Americans for Tax Reform, which supported sequestration.

“You’ve seen spending held flat, year over year, and now it’s shrinking,” Duppler said. “Sequestration is going to stick, it has a lot of traction.”

The funding bill that became law yesterday, known as the “continuing resolution,” passed the House March 21 in a 318-109 vote and was approved by the Senate a day earlier, 73-26.

House Appropriations Committee Chairman Hal Rogers on March 21 called the vote a “remarkable” example of cross-party cooperation.

“I’m proud of the fact that we were able to do all of this, frankly, as smoothly as it has gone,” the Kentucky Republican said. “We’ve proved that when we set our mind to it, we can get complicated, hard things done and that’s what this bill does.”

Funding Adjustments

Lawmakers made special adjustments in some critical areas, because of the automatic budget cuts. The Senate shifted $55 million to prevent furloughs of government meat inspectors triggered by the cuts, because meatpacking plants, such as Tyson Foods Inc. (TSN:US), are barred from operating without them.

The new law, which runs more than 1,000 pages, orders the Pentagon to continue a tuition-assistance program for the military; adds $10 billion for the Defense Department to train troops and maintain weapons; and boosts an Agriculture Department nutritional assistance program for low-income mothers by $250 million. Under budget cuts, the Women, Infants and Children program had been reduced by about $350 million.

The National Institutes of Health, the government’s medical research arm, won a $71 million increase -- though it’s also targeted for a $1.5 billion hit under the automatic cuts.

The law extends a pay freeze for federal workers, funds restoration efforts of the Capitol’s cast-iron dome, one of the oldest such structures in the world, and provides a one-time $193,400 “bereavement payment” to the wife of the late Hawaii Senator Daniel Inouye, a Democrat who died in December. The Senate traditionally provides a year’s salary to the survivor of a lawmaker who dies in office.

The bill is H.R. 933.

To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net; Brian Faler in Washington at bfaler@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net


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