Congress effectively missed the deadline to avert the automatic spending cuts, originally passed into law in the summer of 2011. President Obama will officially enact the cuts by the end of the day Friday – but there will be cuts.
As the White House has come to acknowledge, the impact of the cuts will – for the most part — not be felt immediately.
The billions of dollars in budget cuts are most likely going to phase in over the next few months. Furloughs of government workers will begin several weeks from now. Administration officials say the impact of this and other cuts will build up over time; President Obama describes the effect on the economy as a “tumble downward.”
But some fiscal hawks see a silver lining, in that the sequester will force the government to trim the waste in order to shield higher-priority items. Already, the White House budget office is recommending agencies take a skeptical eye toward costly conferences and training programs.
And there’s still time for a deal, only now the debate over the sequester gets wrapped into the debate over an expiring budget provision.
On Friday, Obama is scheduled to meet with congressional leaders from both parties at 10 a.m. This comes after Republicans and Democrats each put forward a proposal Thursday to avert the sequester; each was defeated, paving the way for talks toward a possible compromise.
Still, the two sides remain deadlocked over the issue of raising taxes. Republicans want to replace the current regime of cuts with different, more sensible, cuts. Democrats want to blend in a set of tax increases, closing loopholes for top earners and some corporations.
The effects of the 2013 sequestration will be rolled out over the next several months. It won’t be a government shutdown but it will be a government slowdown.
“The impact of this policy won’t be felt overnight but it will be real,” Obama said. “The longer these cuts are in place, the greater the damage.”
The predicted impact of the spending cuts could come in flight delays, limited hours at national parks, longer wait times at border crossings and furloughs of civilian Pentagon employees – and workers at several other agencies.
Some officials say the administration has the leeway, or should be given the leeway, to spread around the budget pain.
“There is so much hype on this, it’s ridiculous,” David Walker, former U.S. comptroller general, told Fox News. “We spend as much money as the next 15 countries put together and some of the people who are hyping this big time are going to be really embarrassed.”
How the public reacts to the cuts will have an effect on how Congress addresses the issue. If voters react with a shrug, the GOP may be less compelled to agree to the kinds of tax increases Obama wants. If there’s a big backlash, the Obama administration may take it as vindication that the public won’t stand for big cuts to federally funded programs. Still, Republicans point out that the sequester idea originated at the White House.
“The sky is not going to fall but things will get progressively worse,” Maryland Democrat Rep. Chris Van Hollen said.
White House spokesman Jay Carney said Friday’s talks are designed to be a “constructive discussion” about how to keep the deep spending cuts from having harmful consequences.
The meeting, the first face-to-face since Obama was sworn in for his second term in January, will essentially look past the current $85 billion in cuts to the next looming fiscal crisis – a possible government shutdown.
On March 27, the fiscal 2013 continuing appropriations resolution expires, cutting off the ability of most agencies and programs to operate. A new spending bill will be needed to keep the government from shutting down.
Following March Madness – budget style – Congress will have two months to decide on the debt limit. Congress has suspended enforcement of the $16.4 trillion limit on federal borrowing until May 18. The short-term debt limit deal will then raise the borrowing limit the following day, on May 19, to the debt accumulated up through May 18. The short-term extension, approved in January, will allow what budget experts project will be $450 billion in additional borrowing before the debt limit is raised to a new, higher level.
And then, even if no increase in granted by May 19, the Treasury Department will be able to stave off a final day of reckoning until late July or early August by redeploying cash management measures which would allow it to claw back about $220 billion worth of borrowing capacity.