Information on Sequestration & Deficit Reduction

Nov 14, 2012

In the weeks ahead, Congress must deal with several important challenges. One issue that I know a lot of folks have heard about is what’s being referred to as “sequestration.” There’s a lot of information online and in the news on this issue, but I wanted to offer constituents additional resources to learn more on the issue as the House and Senate work to find agreement on a commonsense deficit reduction package.

What Is Sequestration: The Budget Control Act (PL 112-25) enacted last year provided for raising the nation's debt limit by $2.1 trillion, in return for an equivalent level of spending cuts or other deficit reduction over 10 years, with the initial $917 billion in deficit reduction through statutory spending caps through Fiscal Year 2021. The remaining $1.2 trillion in deficit reduction was left up to a bipartisan panel in Congress, known as the “Super Committee,” that would make recommendations for Congress to approve or disapprove. If the Super-Committee failed to act on a package of targeted cuts, a backup enforcement mechanism would kick in, known as sequestration, under which the $1.2 trillion in savings would be achieved through automatic cuts, with half the reductions to come from defense.

The targeting of the automatic cuts was intended to force both political parties and the President to compromise. For example, one area of particular concern is the defense budget, which would be cut an additional $55 billion per year from the levels established in Budget Control Act. In total, over $1 trillion would be cut from the defense budget over 10 years with disastrous consequences for soldiers, veterans, national security, and the economy. The combination of cuts to force structure and advanced technology would lead to a hollow force increasingly uncertain of its ability to defend the nation. Unfortunately, the Super Committee failed to reach agreement, which means sequestration is set to begin on January 2, 2013, unless Congress acts to find the necessary cuts elsewhere.

House-Passed Bill Replaces Arbitrary ‘Sequestration’ Cuts with Responsible Spending Reforms:  Both Republicans and Democrats have warned of the consequences from both immediate sequestration cuts and the looming debt crisis.  However, only the House has put forward meaningful solutions.  On May 10, 2012, the U.S. House passed H.R. 5652, the “Sequester Replacement Reconciliation Act of 2012,” which would avoid the across-the-board sequester cuts to national defense and domestic programs, and replace them with responsible spending cuts through mandatory spending reforms that reduce the deficit.  

The spending cuts and reforms passed under H.R. 5652 were proposed by the Committees on Agriculture, Energy and Commerce, Financial Services, Judiciary, Oversight and Government Reform, and Ways and Means.  Here is a list of these spending reforms:

  • Ensuring individuals are eligible for the taxpayer-funded benefits they receive. For example, by closing unnecessary eligibility loopholes and stopping fraud in the food stamp program we can save taxpayer dollars and ensure assistance continues for those who need it most.
  • Restraining spending on government bureaucracies. The legislation eliminates the ability of newly created bureaucracies to set their own budgets, and asks federal employees to share more in the cost of their retirement benefits -- just as private sector workers must do.
  • Streamlining a maze of duplicative and overlapping federal programs. The legislation scraps the 1956 Social Services Block Grant that’s duplicated by dozens of newer programs, takes steps to ensure the Child Tax Credit isn’t misused by requiring Social Security Numbers on tax returns, and many other common sense efficiencies.

Working with the Senate to Avoid a Crisis: The need for members of Congress to compromise on a plan that makes prudent spending cuts resulting in real deficit reduction could not be more urgent. Unfortunately, to date, the Senate has failed to bring up the House-passed proposal (H.R. 5652) or offer an alternative one of its own.  In the weeks ahead, I am hopeful that the Senate will act and both chambers can ultimately agree on a compromise bill that will lay the groundwork for sound fiscal policies and reduce the debt, but without jeopardizing national security while asking our troops and their families to pay for Washington’s failures.