The Sequester Died on May 5

Mark Harkins | May 30, 2017

Sequestration put into place by the Budget Control Act in 2011 (BCA) is still on the books.  But Congress, with the acquiescence of the President, has found a way to make that point moot.  By invoking another section of budget law, section 251(b)(2)(A)(i) and (ii) of the Balanced Budget and Emergency Deficit Control Act of 1985, Congress circumvented the spending caps by deeming their priorities an emergency.

That action essentially killed the sequester on May 5, 2017.  The final blow was felled by President Trump when he signed H.R. 244, the HIRE Vets Act, into law.  To be sure, the sequester was mortally wounded the day before when the Senate passed the Consolidated Appropriations Act of 2017, known colloquially as the FY 17 Omnibus.

A quick walk through the numbers will make the point clearer.  All of these apply to FY17 but similar numbers apply all the way to FY21 so this method of spending still has some time to develop.

The BCA was put into place to rein in discretionary spending of the federal government.  It set caps (limits) on both National Defense and non-Defense spending for 10 fiscal years starting with FY12. Below is an excellent chart from a Congressional Research Service report:

Note that the original caps are adjusted by “Automatic Spending Reductions” otherwise known as sequestration.  Also note that the sequestered amount is different almost every year.  The budget deals in 2013 and 2015 both relieved part of the cuts by moving additional cuts (to just mandatory programs for the budget geeks reading this) beyond 2021.  But for this blog, stay focused on 2017.

The defense number for 2017 is $551 billion and the non-defense number is $519 billion.  By law, anything spent by agencies above those thresholds would trigger an across the board spending cut — a sequester.  So naturally, one would assume Congress appropriated the FY17 Omnibus to that level.  Well, yes and no.

If you look at the revised 302(b) allocation filed by the Senate Appropriations Committee on May 4th (S2747) you will see the numbers in the Omnibus were a bit above the statutory limit. The final non-defense number is $554 billion and the Defense number is $634 billion! These are not minor adjustments but fully $118 billion above what the law allows without the sequester kicking in.

But all $118 billion is designated as an emergency by the Congress and also by the President, thereby sparing the government from the sequester.

Why does this matter?

Toward the end of March, President Trump sent a list of nearly $18 billion in cuts to the CURRENT year, FY17, appropriations.  The administration was hoping to have them included in the FY17 Omnibus to partially offset the $33 billion additional he was requesting for emergency funds.  As you can see above, Congress not only disregarded those cuts but increased the emergency funding and spent more.  What was the President’s reaction? Well, he signed the bill with all the extra funding into law, although media reports indicate he was not happy.

Last week the President released his budget blueprint for FY18.  Much has been reported about the cuts to EPA of more than 30% as well as cuts to Medicaid and Social Security Disability Insurance.  Maybe some of those cuts will be honored, but more likely is a scenario where Congress again ignores the President and continues to spend up to and possibly beyond what the law allows now that they have figured out how to bury the sequester.

Mark Harkins is a Senior Fellow at the Government Affairs Institute

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