The combined effects of the expiration of current tax policies and a scheduled sequester have, of late, been receiving their due attention for their potential impact on the economy. The tax policies in question account for roughly $400 billion, about 2.5 percent of GDP, with the sequester adding an additional $100 billion. While the magnitudes of these fiscal changes – the combination of tax hikes and across-the-board spending cuts – are known, policymakers remain in the dark on just how the sequester is supposed to be implemented. Until the Office of Management and Budget (OMB) makes certain determinations, and the president makes clear whether or not he intends to exempt military pay, the exact composition of the scheduled sequester is unknowable.
A key aspect of the Fiscal Year 2013 sequester is that the cuts occur no matter how much Congress appropriates. In other words, Congress can’t obviate the sequester by providing less funding than would otherwise be the case. However, as Congress addresses Fiscal Year 2013 appropriations, the extent of the sequester’s reach should presumably still deserve consideration as the House and Senate contemplate program funding levels. Unfortunately, the necessary guidance from OMB remains elusive.
Enter Senators John McCain (R-AZ) and Patty Murray (D-WA), and the House Appropriations Committee. Just last week, Senators McCain and Murray led a bipartisan amendment that would require both the OMB and the Department of Defense to detail the effects of the scheduled cuts. Meanwhile, the House Appropriations Committee recently reported the FY2013 Financial Services Appropriations Bill. Within the funding bill is a requirement for OMB to provide a detailed report of how the sequester will affect both discretionary and direct spending accounts – precisely the detail that OMB will ultimately need to articulate, but has so far been unwilling to share.
President Obama continues to cling to what he calls a “balanced approach,” in his budget proposal (which garnered no votes in either chamber of Congress) as the means to fiscal responsibility, despite the fact that even former President Clinton recognizes that simply raising taxes on the wealthy falls far short of addressing our fiscal mess.
While the president remains wedded to his politically motivated budget framework and his administration remains mum on guidance for dealing with the sequester, agencies are left to wonder how to implement the sequester in the absence of intervening action. Interestingly enough OMB recently posted its “Fiscal Year 2014 Budget Guidance.” By nature this is intended to provide guidance to agencies in the construction of their Fiscal Year 2014 budget requests. Conspicuously absent from this “guidance” is any guidance for agencies related to the sequester. The administration is apparently content to operate with blinders on for not just next year, but for 2014 as well.
The administration cannot continue to maintain this farce. Either it must provide information to agencies who are attempting to budget (something Congress has failed to do for more than three years) or they need to begin working with those in Washington who are attempting to replace the sequester with a more sound approach that does not threaten the security of the United States.
Until the administration gets serious about how to address the scheduled sequester, which the Congressional Budget Office has projected would contribute to a potential recession, any “guidance” from OMB on next year’s approach to budgeting is fantasy. Unfortunately, it appears this is a world in which the administration seems content to live.