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Monday
Feb182013

Sequestration: DC's Weird Idea of Cuts

iStockPhoto/Thinkstock(WASHINGTON) -- It's the dirtiest word in Washington right now: "sequester."

Formerly wrapped up in the "fiscal cliff" that was poised to wreck America's economy at the end of the year, the dreaded "sequester" is the spending half of that taxes-and-spending equation: It amounts to across-the-board budget cuts that will strike in March, barring an agreement on deficit reduction.

The "sequester" is yet another deadline in a long line of fiscal-policy stalemates that have hounded the U.S. political system in the last two years. Because its origins were esoteric and convoluted, the "sequester" is shrouded in a degree of Washington policy mystique.

Hopefully a few answers can de-mystify it:

What Is the Sequester?

Across-the-board budget cuts. On March 1, barring agreement on a broader deficit-reduction package, many federal programs will see across-the board automatic spending reductions take effect over the next 10 years.

The 10-year cuts will total $1.2 trillion, and they'll apply equally to defense and non-defense spending.

What Will Be Cut?

Federal agencies and their budgets, including defense spending. Both mandatory and discretionary spending will be cut.

Different kinds of spending will be hit harder by percent. In September, the Office of Management and Budget estimated that if the cuts occurred as projected in January, discretionary defense spending would be cut by 9.4 percent in Fiscal Year 2013, mandatory defense spending would be cut by 10 percent, discretionary nondefense spending would be cut by 8.2 percent, mandatory nondefense spending would be cut by 7.6 percent, and Medicare and other mandatory health programs would be cut by 2 percent.

Some vital programs, however, will be exempt.

What Will Be Spared?

Thankfully for beneficiaries, the sequester won't touch some of the most popular and relied-upon elements of the social safety net.

Medicare, for instance, will be cut -- but under a special rule that limits spending reductions to 2 percent, and which also prevents any benefits from being reduced. Sequestration cuts would come in the form of lower payments to doctors, hospitals and private insurers, according to the Congressional Research Service.

Other programs are totally exempt. Those include Social Security, all programs administered by the Veterans Administration, Medicaid, the Children's Health Insurance Program (CHIP), welfare (a.k.a. Temporary Assistance for Needy Families or TANF), Pell grants, food stamps (a.k.a. the Supplemental Nutrition Assistance Program or SNAP), and Medicare Part D low-income subsidies, among other programs.

Nobody knows exactly how it will play out. In January, the Congressional Research Service wrote, "Ultimately, the execution and impact of any automatic spending reduction ... will depend in large part on the legal interpretations and actions taken by OMB."

Why Does the Sequester Have to Happen?

It doesn't!

Congress and the president gave themselves a requirement to find $1.2 trillion in savings over 10 years, and they could still find a way to reach that goal before March 1. That could be tough, and barring a political miracle, sequestration will likely take effect for a few weeks.

At the same time, sequestration only looms as a possibility because Congress and the president wrote it into a law -- and they could just as easily rewrite it. They've already extended their deadline twice, and, unlikely as it may be, there's no reason why Congress and Obama couldn't simply write a new law that makes "sequestration" go away. If sequestration is an artificial crisis, it can be artificially undone.

Copyright 2013 ABC News Radio