On Sept. 14, the Obama administration released a new report specifying cuts in federal spending that will take effect starting Jan. 2, 2013, if Congress does not take corrective action before then stopping the cuts from taking place. The report was mandated by the Sequestration Transparency Act of 2012 (P. L. 112–155), enacted on Aug. 7.
The cuts themselves are mandated by the Budget Control Act (BCA) of 2011. In specifying the cuts required under the BCA, the administration indicated its opposition to sequestration. According to the report:
The Administration strongly believes that sequestration is bad policy, and that Congress can and should take action to avoid it by passing a comprehensive and balanced deficit reduction package.
The report cited two previous administration budget proposals as examples of "balanced" deficit reduction packages.
On two separate occasions, the President has put forward proposals to responsibly avoid these arbitrary cuts: first, in the President’s Plan for Economic Growth and Deficit Reduction that was presented to the Joint Committee in September 2011, and second, in the President’s fiscal year (FY) 2013 Budget. Both of these plans made tough choices to reduce the deficit with a balanced package of spending cuts and revenue increases, with the FY 2013 Budget proposing $2.50 in spending cuts for every $1 in new revenue. Both plans included over $4 trillion in deficit reduction, including the deficit reduction in the BCA itself, far exceeding the amount that would have been required of the Joint Committee to avoid sequestration. Importantly, the President’s proposals would ensure that deficit reduction is achieved in a way that asks the top two percent of Americans to shoulder their fair share of the burden.
According to the report, starting Jan. 2, defense programs will be cut by $54.7 billion, with the total amount allocated proportionately between discretionary and mandatory programs. Discretionary defense programs that are not exempt will be cut 9.4 percent and mandatory programs that are not exempt by 10.0 percent.
Non-defense spending will also be cut by $54.7 billion, with discretionary programs that are not exempt cut by 8.2 percent and mandatory programs that are not exempt cut by 7.6 percent. Medicare is handled separately and would be cut by 2 percent, with the cuts imposed on Medicare providers.
In each case, the percent reductions in spending are from funding levels that would occur if a continuing resolution (CR) is enacted for the upcoming federal fiscal year, which starts Oct. 1. Enactment of the CR is expected to take place the week of Sept. 17.
The administration was not given flexibility to determine how the cuts would be implemented. The rules were laid out in the Budget Control Act and date back to the 1985 Gramm-Rudman-Hollings Balanced Budget and Emergency Deficit Control Act. Sections 255 and 256 of that law identify programs exempt from sequestration and subject to special rules.
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