OMB Updates Budget Caps Under Sequester Law

Almost simultaneously with its release of President Obama’s fiscal 2014 budget request, the Office of Management and Budget this week sent Congress three mandatory reports updating budget caps under the sequestration law, throwing in a familiar plea to lawmakers to reach a new budget compromise that cancels future automatic spending cuts.

Acting budget director Jeffrey Zients, in a letter citing requirements under the amended 1985 Balanced Budget and Emergency Deficit Control Act, reported newly adjusted discretionary spending limits, for fiscal years 2013 through 2021, along with a summary of Obama’s proposed and expected changes to the caps.

Separately, on April 10 the president signed the sequestration order for fiscal 2014.

In fiscal 2014, “the law requires the lowering of the discretionary caps by $91 billion and the sequestration of $18 billion in direct spending. Specifically, the defense discretionary cap will be reduced by $54 billion and the nondefense discretionary cap will be reduced by $37 billion,” Zients wrote. His letter came as Congress began hearings on Obama’s 2014 budget proposal.

In addition, OMB calculated, the sequestration of non-exempt direct spending requires cuts of 2 percent to non-exempt Medicare spending, 7.3 percent to other nonexempt nondefense mandatory programs, and 9.8 percent to non-exempt defense mandatory programs.

Also, as the 2011 Budget Control Act requires, OMB published a final review of sequestration’s impact in fiscal 2013 noting that the effects, as cross-checked with the Congressional Budget Office, are within the law’s caps so that no authority for new adjustments is required.

Zients’ letter asserted that “these reports demonstrate the need to enact a comprehensive deficit reduction plan to replace the Joint Committee reductions and set an appropriate level of spending in [fiscal] 2014 to support economic growth and job creation and provide for critical government services.” The Joint Committee refers to the so-called “Supercommittee” that tried, under the 2011 law, to agree on a budget package cutting the long-term deficit by $1.2 trillion. The committee failed, prompting sequestration.

Obama’s 2014 budget proposals, Zients continued, “reflect the tough choices that must be made. The administration stands ready to work with the Congress to enact comprehensive deficit reduction legislation that replaces the blunt Joint Committee reductions with responsible, balanced deficit reduction and puts the nation on a sound long-term fiscal path.”

In Congress, Senate Appropriations Committee Chairwoman Barbara Mikulski, D-Md., announced she would begin consideration of fiscal 2014 spending bills on the assumption that sequestration is superseded. “I support the top-line funding level of $1.058 trillion, which is consistent with the bipartisan American Taxpayer Relief Act that passed the Senate just three months ago by an overwhelming vote of 89-8,” she said. “We should stick to that deal and find a balanced solution to eliminate sequester. Sequester is a terrible policy that was never intended to happen.”

On the Republican-controlled House side, leaders reportedly will factor sequestration into their planning. Appropriations Chairman Hal Rogers, R-Ky., greeted Obama’s budget with skepticism, calling the document an “anticlimactic political exercise, containing ‘par for the course’ policies at a time when we need a real, substantial change in how government manages the nation’s finances.”

The differing approaches set up a clash between the chambers, both of which appear to be challenging the Budget Control Act, says Richard Kogan, a senior fellow at the liberal-leaning Center for Budget and Policy Priorities who formerly worked at OMB.

The House-passed budget resolution authored by Rep. Paul Ryan, R-Wis., pockets the sequestration cuts and works off an overall budget of $967 billion, as estimated by the Congressional Budget Office, which is $91 billion less than what Mikulski is starting with. Ryan has also said he wants to “breach the cap” on defense and give the Pentagon an extra $55 billion, making up the difference in domestic cuts. “If the appropriations committee meets Ryan’s totals and splits things evenly as the law requires,” Kogan said, “that would be inconsistent with the Ryan budget’s priorities. So they either take on the law, or they try to conform with the law and be seriously inconsistent with the Ryan priorities -- they can’t push it aside.”

Mikulski, Kogan added, “is basically encouraging Congress to do as the president requests, which is to overturn the sequestration law and replace the savings with savings elsewhere in the budget. That’s all well and good, but if it doesn’t happen,” he said, “there will be a sequestration in both defense and non-defense spending to get funding back down to OMB’s overall level of $967 billion.”