Sequester 2013: Brace Yourself For A Year Of Huge Budget Cuts


Politicians in Washington, D.C., could be adding a whole new meaning to March Madness with the impending sequester: a series of across-the-board spending cuts to domestic and defense programs. Expected to go into effect on March 1 with spending cuts totaling more than $1 trillion, these widespread federal budget cuts could have damaging effects on the country’s economy.

Much like the fiscal cliff battle, the sequester was created by Congress and the White House as a way to ensure action on the country’s debt problems. But that goal might have completely backfired. Rather than spur politicians to take action to avoid large-scale domestic cuts (opposed by Democrats) and defense cuts (opposed by Republicans), the sequester seems to be more and more set in stone as politicians are stuck in political partisanship to avoid the cuts. Politicians have expressed concern that the federal debt will reach 100% of GDP in 2027. However, it must be noted that the sequester will only push this breach back by two years.

On Tuesday, President Obama called on Congress to pass a small package of spending cuts and tax changes to delay the deep cuts to defense and domestic programs.  However, with partisanship at one of its finest moments in D.C., the sequester that Obama pledged “will not happen” during October’s presidential debate seems to be rather unavoidable.

Here’s a brief breakdown of the $1.2 trillion sequester package that would take effect over the next 10 years. Apart from the $216 billion in assumed debt service savings, spending cuts will total $984 billion split evenly over the next nine years.

Defense spending will see $492 billion in lower annual discretionary funding. Non-defense cuts will also see $492 billion in cuts, split between different domestic programs: lower annual discretionary funding ($322 billion), 2% cut to Medicare provider payments ($116 billion), Obamacare exchange subsidies ($7 billion), and other mandatory cuts ($41 billion).

It’s also important to look at what is exempt from the sequester. Social Security, Medicaid and food stamps (SNAP) cannot be touched. Further, Medicare’s annual cuts are to be limited to 2% and made to provider payments. In addition, some non-defense discretionary programs are also exempt, including Pell grants, Department of Veterans’ Affairs programs, transportation programs by the Highway Trust Fund, and a cap at 2% for cuts to Indian health and migrant health centers.

Over the next few weeks, Obama will continue to push Congress to push back the self-imposed sequester in an effort to avoid further negative impacts on the country’s already fragile economy. According to the Bipartisan Policy Center, sequester cuts will damage economic growth, cost the economy over 1 million jobs in 2013 and 2014, and cut domestic discretionary spending to some of its lowest levels in decades.

However, it is far from possible to know for sure exactly how the cuts will take form since implementation is up to the White House’s Office of Management and Budget (OMB).