Obama Promises to Veto Any Spending Bill With Sequestration Cuts

President Obama said recently he will refuse to sign any spending measure for fiscal 2016 and beyond that does not walk back the spending caps required by sequestration, setting up a fiscal showdown with the Republican controlled Congress committed to reducing federal spending.

Asked in an interview Friday how he could reconcile the priorities laid out in his fiscal 2016 budget blueprint with spending caps established in the Budget Control Act, Obama told The Huffington Post he would not sign any bill that continued the program. Sequestration caps were partially lowered in fiscal 2014 and 2015, but they will take effect again in October and continue through 2023, absent congressional action.

Obama proposed in his budget to increase spending levels in fiscal 2016 $74 billion above the caps, or 7 percent higher than the current law allows. Republicans said that proposal gave them a “good laugh,” and have proposed two separate blueprints that would reduce domestic spending at non-Defense agencies by significantly more than is required under sequestration.

The Republican proposals, coupled with Obama’s new veto threat, create a massive chasm with no obvious path to bridging the divide. Republican leaders promised no appropriations lapses in the 114th Congress, though they just barely staved off a shutdown of the Homeland Security Department in February. Federal agencies are currently funded through September.

In both their Senate and House budgets, which lawmakers are considering this week, Republicans proposed major cuts to federal agencies’ rolls and employees’ compensation. In a report on its resolution, the House Budget Committee said specifically that agencies are expected to meet discretionary spending cuts in part through attrition measures resulting in a 10 percent reduction in the overall size of the federal workforce.

Under the plan, agencies would only fill one out of every three vacancies created by employees leaving federal service. The Internal Revenue Service -- which has slashed 13,000 positions since 2010 -- would be at particular risk for job cuts, as Republicans said a simplified tax code would result in a diminished IRS footprint.

The blueprint also suggests increasing federal employees’ contributions to their pensions, effectively resulting in a pay cut of between 2 percent and 5 percent. The plan suggests eventually phasing out the defined benefit program entirely in favor of just a defined contribution system. The changes would save $127 billion over 10 years, the committee said. 

House Republicans proposed phasing out the Federal Employees Retirement System annuity supplement, designed to boost the annuity of young retirees. They also proposed limiting the rate of return on the Thrift Savings Plan’s Government Securities (G) Fund, noting it could save $32 billion over 10 years.

The budget framework would also make changes to the Federal Employees Health Benefits Program, including tying the government’s share of premiums for retirees to inflation rather than the average cost of plans. It proposes tying retirees’ health benefits to length of service. The initiatives would save $21.7 billion and $1.2 billion, respectively, according to committee estimates. Postal employees would also have to contribute more toward their health and life insurance premiums under the Republican plan.

In his last two budgets, Obama declined to include the proposals to cut feds’ compensation present in his previous frameworks. When rolling out his blueprint in February, Obama told a group of federal workers he would “keep on fighting to make sure that you get the resources you deserve.”  

In advance of Obama’s February budget release, administration officials said sequestration created “arbitrary budget cuts” and “mindless austerity.” In his recent Huffington Post interview, Obama pointed specifically to cuts to education spending as emblematic of why he would veto any spending bill that continues the Budget Control Act program.

“We can’t do that to our kids and I’m not going to sign it,” Obama said.

To date, some Republicans in Congress have fought to restore full Defense Department funding, but have shown no interest in rolling back sequestration at non-Defense agencies. If the House and Senate can pass a unified budget, it would serve as non-binding framework for the appropriations process and would not require Obama’s approval.