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Sequestration: Don’t Believe All The Hype

Posted by Robert Hale on


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Bob Hale regularly demonstrated his better qualities during testimony before Congress, delivering highly complex facts and judgments about the Defense Department’s spending and budgets to the public with a knowing humor delivered with the sort of gravelly voice you’d expect from one of those old country lawyers.  Hale served as DoD comptroller from 2009 to 2014, and, before that, he headed up the Congressional Budget Office’s national security division. He knows audits, budget lines and Congress so when he speaks about sequestration — as he does below — he does it with great authority. Read on. The Editor.

From Wall Street to Pennsylvania Avenue, speculation is on the rise about the defense budget: Are we headed for yet another impasse and automatic sequestration budget cuts like the one that occurred in 2013? Or not?

The sequestration process has few fans and a slew of misconceptions. As talk of another round of sequestration grows, it is important to separate rhetoric from reality. (Rhetoric is in bold!)

First, there is no doubt. Another round of sequestration is a lock.

The recently released fiscal 2016 budget proposes agency funding that exceeds spending caps set by current law. If Congress appropriates these funds and does not increase the caps, current law would require another round of across-the-board, salami-slice cuts. This is the only act that really constitutes “sequestration,” despite widespread use of the word in other contexts.

Congress, however, could take two other actions that are much more likely. It could approve more funding in at least some budget categories and raise the budget caps to accommodate the boosted funding. This could be accomplished in a mini budget deal (as opposed to the forever elusive “grand bargain”) that, hopefully for at least a few years, would effectively eliminate the threat of sequestration in favor of considered choices. Congress has done this before (see below).

Alternatively, Congress could leave the caps in place and cut the president’s request down to the budget-cap levels. This would leave the agencies with sequester-level funding, but at least the government would avoid automatic, salami-slice cuts in favor of considered decisions about what specific programs to fund (or not).

But Congress would never increase budget caps to avoid sequestration.

Congress increased the caps twice since the current sequestration process was put into place in 2011. The American Taxpayer Relief Act of 2012 increased both the defense and non-defense caps, as did the Bipartisan Budget Agreement of 2013. Increasing the caps again would be a heavy political lift because, in order to secure votes for passage, any cap increase would likely have to be offset by higher taxes and/or entitlement cuts. But make no mistake: the caps have been raised before.

The 2013 sequestration wasn’t that painful.

If you didn’t notice any serious effects from the 2013 sequester cuts, then you weren’t watching. Sequestration caused the Air Force to halt training flights at a dozen combat-coded air squadrons, and the Army stopped sending most brigade combat teams through their culminating training exercises. These actions damaged military readiness. Also, the Navy was unable to send a second aircraft carrier strike group to the Persian Gulf, despite Middle East instability and a request from the combatant commander. In addition, about 600,000 civilian DoD employees were placed on unpaid furloughs – disrupting important tasks like weapons repair, operation of testing and training ranges, and medical care. And the Defense Department was not alone: civilian agencies also curtailed services and cut programs on short notice.

Sequestration 2015 = more furloughs.

Furloughs would probably not happen again, even in the unlikely event that sequestration recurs. In the months leading up to the 2013 sequestration, government leaders at all levels expected a budget deal: as a result, they did not immediately cut spending down to cap levels. Moreover, unanticipated shortfalls in wartime funding exacerbated problems at the DoD. When sequestration hit, agencies were forced to hit the brakes – hard – to save a lot of money in a short period of time. If sequestration were to occur again in 2016, the slowdown would be easier to accommodate because agencies are already operating at reduced spending levels. Furloughs would be far less likely.

Sequestration is a “sign of the times” – the product of political gridlock.

There is nothing new about sequestration (and the politics driving it). Sequestration procedures were first established in the Balanced Budget and Emergency Deficit Control Act of 1985, and several rounds of sequestration cuts occurred in the 1980s (including a substantial one in 1986). The 2011 budget law amended the original 1985 act but kept its key provisions. These sequestration procedures were a poor way to control spending in the 1980s; the same is true today.

Bob Hale, who served as the Pentagon’s comptroller and chief financial officer from 2009 to 2014, is a Fellow at Booz Allen Hamilton.

What do you think?