December 22, 2014

OMB Report Details Automatic Cuts

  • The federal budget is an expression of our country's values. Where we choose to spend and at what levels, how and who we tax, and the borrowing we...

Last Friday the Office of Management and  Budget  (OMB) released a report detailing the effects of automatic spending cuts scheduled to begin taking effect in January. The cuts are required by the 2011 Budget Control Act (BCA) because the Joint Select Committee on Deficit Reduction that was created by the law failed to agree on a plan to reduce projected deficits by $1.2 trillion and Congress has also not enacted a deficit-reduction proposal.  

The BCA requires automatic cuts -- also called “sequestration” -- totaling $1.2 trillion for FY 2013 through FY 2021, which would mean a cut of $109 billion next year. The cuts would apply to both discretionary and mandatory spending, though partial exemptions for mandatory programs such as Social Security, Medicaid and Medicare would cause the cuts to fall largely on annual appropriations. The cuts are divided evenly between defense and non-defense spending.

In the report, which was required by a law signed by the President last month, OMB estimated the specific effects of sequestration on over 1200 accounts across the federal budget. The sequestration would result in a 9.4  percent reduction in non-exempt defense discretionary funding and an 8.2 percent reduction  in non-exempt non-defense discretionary funding.

The report is a reminder of the severe impact that the automatic cuts will have across the federal budget if they take effect.  It is important for Congress to act on a plan to place our nation on a sustainable path, though automatic cuts with no policy rationale behind them are not a responsible way to budget.