Let's assume for the moment that Republicans cave on the debt ceiling and agree to raise it. What Washington-created disaster comes next? The answer: the sequestration on March 1 followed by the expiration of stopgap government funding bills on March 27. In a letter
to the heads of federal departments and agencies, acting White House budget director Jeffrey Zients wrote:
In the corning months, executive departments and agencies (agencies) will confront significant uncertainty regarding the amount of budgetary resources available for the remainder of the fiscal year. In particular, unless Congress acts to amend current law, the President is required to issue a sequestration order on March 1, 2013, canceling approximately $85 billion in budgetary resources across the Federal Government. Further uncertainty is created by the expiration of the Continuing Appropriations Resolution, 2013 (CR) on March 27, 2013. This memorandum directs agencies to take certain steps to plan for and manage this budgetary uncertainty.
Among those steps: prioritizing mission critical agency operations as well as those essential for preventing loss of life or negative health and safety consequences; review cost-slashing measures including hiring freezes, layoffs, buyouts, and furloughs; and reviewing grants and contracts to identify which may be cut.
Zients wrote that despite his guidance on how agency and department heads should prepare for the sequestration and potential government shutdown, the White House wants Congress to fix the problem:
The Administration continues to urge Congress to take prompt action to address the current budgetary uncertainty, including through the enactment of balanced deficit reduction to avoid sequestration. Should Congress fail to act to avoid sequestration, there will be significant and harmful impacts on a wide variety of Government services and operations. For example, should sequestration remain in place for an extended period of time, hundreds of thousands of families will lose critical education and wellness services through Head Start and nutrition assistance programs.
The Department of Defense will face deep cuts that will reduce readiness of non-deployed units delay needed investments in equipment and facilities, and cut services for military families. And Federal agencies will likely need to furlough hundreds ofthousands of employees and reduce essential ervices uch a food inspections, air travel safety, prison security, border patrols, and other mission-critical activities.
At this time, agencies do not have clarity regarding the manner in which Congress will address these issues or the amount of budgetary resources that will be available through the remainder of the fiscal year. Until Congress acts, agencies must continue to prepare for the possibility that they will need to operate with reduced budgetary resources.
Although House Republicans certainly are the driving force behind this particular fiscal train wreck, it's important to remember that President Obama signed into law the sequestration budget cuts and he also signed into law the expiring continuing resolution. In fact, he signed the sequestration cuts into law again when we negotiated a two month extension of them during the tax cliff debate.
The tragic thing about these cuts is that nobody really wants them. The president doesn't want them (even though he signed them into law). House Speaker John Boehner doesn't want them (even though he says he got 98 percent of what he wanted out of the debt limit deal that created the sequestration). The theory was the cuts would be so onerous, they would provide leverage for a Grand Bargain, but it turns out nobody wants a Grand Bargain either. It's a actually a fitting a symbol of just how completely our government is failing to address the number one challenge facing America today: economic growth.
So while I don't think we'll ultimately default, I'm not terribly optimistic about how things will go after that. But, on the bright side, things could be worse. Probably.