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Focus on Regulation

Obama Administration Releases Report on Sequestration

Many questions about the effects of the anticipated mandatory reductions in federal spending required by the Budget Control Act (BCA) remain unanswered after the Obama Administration released a report required by the Sequestration Transparency Act of 2012.  The report, released on September 14, 2012, provides preliminary estimates of the reductions required to 1,200 accounts in the federal budget to achieve the $1.2 trillion in deficit reduction from fiscal year (FY) 2013 through FY 2021 required by the BCA.  Under the BCA, reductions in spending are to be divided evenly between defense spending and non-defense spending.  Certain mandatory spending programs, such as Medicaid and Social Security, are exempt from sequestration, and Medicare is limited to a two percent reduction. 

The report explains that sequestration would result in the following reductions:

  • Non-Exempt Defense Discretionary spending:  9.4%
  • Non-Exempt Defense Mandatory spending:  10.0%
  • Non-Exempt Nondefense Discretionary spending:  8.2%
  • Other Non-Exempt Nondefense Mandatory spending:  7.6% percent
  • Medicare:  2.0%

The report includes an appendix identifying whether each budget account is subject to sequestration, the percent reduction applicable to that account, and the total spending reduction expected from that account.  The report does not provide details of the effects on specific agencies or programs, but it explains that “sequestration would be deeply destructive to national security, domestic investments, and core government functions” and it would “undermine investments vital to economic growth, threaten the safety and security of the American people, and cause severe harm to programs that benefit the middle-class, seniors, and children.”

If Congress does not pass legislation to achieve the $1.2 trillion in deficit reduction by other means, a sequestration order will be issued on January 2, 2013 to implement these cuts.  Although neither the President nor Congress want these cuts to take effect, they have not been able to reach an agreement on an alternate deficit reduction plan.