Automatic cuts re-emerge as budget battle issue

WASHINGTON (AP) — The broad, automatic spending cuts known as sequestration have re-emerged as a central issue in efforts to end the partial government shutdown and avert a federal default.

Many conservatives view the past seven months of lower spending levels as one of their rare accomplishments in dealing with President Barack Obama and want to continue them.

But GOP defense hawks complain that the next round of automatic cuts falls almost entirely on the Pentagon, and many Republicans want to shift that burden to domestic programs.

Obama and Democrats would do away with them altogether, substituting new taxes and maybe some spending cuts elsewhere in their place. Republicans are agreeable — Democrats much less so — to trimming future Social Security benefits or making wealthier retirees pay higher premiums for Medicare in place of the automatic cuts.

Sequestration deals mostly with the day-to-day operating budgets of federal agencies. The Veterans Administration is exempt, as are the biggest "mandatory" benefit programs like Social Security, food stamps and Medicaid. The president's health care program — "Obamacare" —also is exempt.

The impact of the automatic cuts that went into effect in March was not as harsh as many people feared. Some agencies were able to move money around to prevent or reduce furloughs.

For many Americans, however, the impacts have been real. Health research has slowed, thousands of Head Start slots have been eliminated and poor people have been left hanging on waiting lists for housing subsidy vouchers.

The future is uncertain but easing or eliminating a new round of automatic spending cuts in January is likely to be a focus of any budget talks once the government reopens fully. Giving agencies more flexibility to adjust to reduced funding levels also is being discussed.

A brief primer on the automatic spending cuts and what might happen next:

—Sequestration was established by the 2011 Budget Control Act to reduce government spending by $1.2 trillion over 10 years. The cuts were to be divided between defense and domestic programs and achieved through caps on the money Congress can appropriate each year.

—For fiscal 2013 ending Sept. 30, sequestration lowered Congress' spending cap from $1.043 trillion to $988 billion. Of the $55 billion in spending cuts, $22 billion was from a 4.5 percent cut in domestic programs and $33 billion was from a 6 percent cut in military spending. That reduced the Pentagon's budget this past year from $552 billion to $519 billion. In addition, benefit programs were cut $17 billion. Of that, $11 billion was from fee reductions for Medicare providers like doctors and hospitals. The other $6 billion was spread among smaller programs like farm subsidies. Altogether the sequester produced total budget savings of $72 billion in 2013.

—For fiscal 2014, the sequester lowers the cap on what Congress can spend to $967 billion. Virtually all of the additional savings would come from new and deeper cuts to the military. The Pentagon's budget would drop from $519 billion to $498 billion.

—The debate: House Republicans want to maintain the $967 billion cap for fiscal 2014 but shift all the sequester cuts from the Pentagon to domestic programs. Democrats want to do away with the sequester entirely and set the spending cap at $1.06 trillion.

Congressional leaders tentatively have agreed to extend the 2013 cap of $988 billion for three months while they attempt to negotiate a broader deal for easing or replacing the automatic spending cuts.

Source: http://news.yahoo.com/automatic-cuts-emerge-budget-battle-issue-060358892--finance.html
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