Slow-moving Sequestration Still Figures in Budget Negotiations

BY Kwame Holman  April 19, 2013 at 10:23 AM EDT

According to a new Wall Street Journal-NBC poll, fewer than 20 percent of Americans report feeling any impact of sequestration — the $85 billion dollars in across-the-board federal spending cuts that got underway March 1. But Democrats maintain the forced cuts will rob the economy of 750 thousand jobs and a few tenths of a percent of growth if left in place for the rest of this year.

“It was never going to be where the sky was falling all at once. So that has created the impression — the false impression — that the sequester is not causing damage,” Chris Van Hollen, the top Democrat on the House Budget Committee, told the NewsHour. “That perception will change over time as you see the constant grinding-down effect of the sequester.”

The Defense Department is one of the few agencies recently granted some leeway by Congress against the mandatory sequestration cuts.

But, Secretary Chuck Hagel told the Senate Armed Services Committee Wednesday, the flexibility “still left in place the deep and abrupt cuts associated with sequester, as much as $41 billion in spending reductions over the next six months.”

“In response,” Hagel said, “the department has reduced official travel, cut back sharply on facilities’ maintenance, imposed hiring freezes, and [put on hold] many other important, but lower-priority, activities.”

Van Hollen, who represents a Maryland district just outside Washington, D.C. that relies heavily on federal spending, has his own tale about job loss.

“A major employer in my district in the biotech industry has said they imposed a hiring freeze because of the sequester with respect to the National Institutes of Health and investments in biotechnology,” said Van Hollen.

“This is not going to be a case where all of a sudden people are thrown out of their jobs but it is every day the case of fewer people being hired for new jobs. So in that way it has this sort of silent job-killing effect.”

Sequestration hit because President Barack Obama and Congressional Republicans could not reach a budget agreement.

The president wants future spending cuts to be mixed with new taxes on wealthier Americans. Republicans say the round of new taxes that took effect in January is enough.

At the same hearing where Hagel complained about sequestration, Sen. Jeff Sessions of Alabama, the top Republican on the Senate Budget Committee said, “the president is saying he wants to eliminate the sequester, or he apparently indicates he does, but he wants to do it raising taxes. And that’s a nonstarter.”

But Van Hollen sees hope for changing the sequestration math.

“The next big issue on the horizon is the question of the debt ceiling and it’s my sense that the Republicans — at least the cooler heads within the Republican party — want to avoid a repeat of the meltdown we saw in … Summer 2011 around the debt ceiling that had a negative impact on the economy,” he said.

That summer, Congress’s flirtation with refusing to increase the nation’s statutory borrowing limit caused a downgrade of the government’s credit rating and a slow-down in the economy.

Van Hollen says Congress likely learned its lesson.

“If you work backward and assume we’re going to find a way to avoid defaulting on our obligations, you’ve got to figure there has to be some kind of bipartisan agreement. So right now it’s not as much the sequester as the issue of dealing with the debt ceiling that will be driving (the two parties) to try to reach an agreement.”

That agreement could eliminate sequestration cuts. The groundwork for it could be laid by a budget conference committee, now that the Democratic-controlled Senate and Republican-controlled House each have passed a budget for the first time in years.

But that may not happen before more sequestration-related pain arrives.

On Thursday, the Federal Aviation Administration announced its plan to furlough air traffic controllers at some of the nation’s busiest airports, which would slow thousands of flights a day.