The automatic spending cuts known as the sequester have ignited a political firestorm in the nation's capital. But if America’s feuding politicos can’t come to an agreement soon, the $1.2 trillion in broad spending cuts will begin March 1, trimming $85 billion a year through 2021. Half of that money would come from the Pentagon and half from non-defense programs, including education and National Parks. Congress has the power to delay, reduce, or cancel the cuts at any time, either before or after they take effect, and programs like Social Security, veterans’ benefits, and student loans will be exempt.
Here’s what you need to know about sequestration as Washington’s gridlock drags us toward spending cuts that Congress passed and Obama signed into law, but that now few lawmakers seem to want.
1. How did we get into this mess?
Sequestration was supposed to be a gun that Congress pointed at itself to force lawmakers to behave and pass a budget. Instead, it’s become just the latest in a seemingly endless series of self-inflicted economic crises that threaten to damage American businesses and undermine credibility with world partners. Sequestration was built into the Budget Control Act of 2011, the bill that brought an end to a bitterly partisan battle over the government’s borrowing power, and included a provision for Congress to develop legislation in time that would have warded off the cuts. The problem with that was Congress failed to pass any such legislation, despite a heated exchange of proposals that went up to the stroke of New Year’s Eve. A bill was passed on January 2 that pushed sequestration back just a little farther – to where we are now.
2. Why call it the sequester?
The term “sequester” is adapted from the legal meaning of the power of a court to seize property, and it came into economic parlance as part of the Gramm-Rudman-Hollings Deficit Reduction Act of 1985. Most people are familiar with the idea of sequestering a jury during high-publicity court trials, but in this case it refers to the threat of cuts that was supposed to "force Congress to act on further deficit reduction," according to a report on the potential effects of sequestration by the White House Office of Management and Budget.
3. Who’s responsible?
The key players are President Obama, Speaker of the House John Boehner, Senate Majority Leader Harry Reid, and wonk lawmakers including Rep. Paul Ryan. They’re the same folks who walked the government into near shutdown in 2011 during the debt-ceiling debacle, squandered America’s AAA credit rating, and held hands to peer over the brink of the fiscal cliff together late last year. Earlier this week, Obama said the idea behind writing the sequester into law in the first place was to get Democrats and Republicans to “find a good compromise of sensible cuts as well as closing tax loopholes.” Republicans have lately been placing all the blame for the pending cuts on the White House, but the measure passed with a majority of Republican votes, and Ryan said at the time that the bill containing the sequester represented “a victory for those committed to controlling government spending and growing our economy.”
4. Will the government shut down?
No. The planned cuts aren't large enough to cripple the federal government. But if they do take place, it will mean that some military deployments may be cancelled, federal agencies and offices like the Transportation Security Administration and Department of Agriculture will reduce services, and some federal employees may be furloughed, asked to involuntarily take off a certain amount of time per week. There may be some alternatives to furloughs, as Jeffrey Zients, Deputy Director of the Office of Management and Budget, said in a memo last month. Those could include government hiring freezes, the release of temporary employees, and incentives for existing employees to retire early. But many Americans can lay some of their most basic concerns to rest: Grandma will not see her Social Security check reduced.
5. When would the cuts take place?
The cuts are scheduled to take effect March 1, but they wouldn’t come all at once. For the current fiscal year, the cuts would total $44 billion, which sounds like a ton of money but represents just 1.2 percent of planned federal outlays. Defense contractors likely would be among the individual industries hardest hit by the cuts, but even there layoffs remain “speculative and unforeseeable,” Assistant Secretary of Labor Jane Oates said. But the Pew Center on the States said cuts in discretionary defense spending could cost more than 400,000 jobs over the next 10 years in Florida, Maryland, Texas, California, and Virginia -- the top five states for defense contracting.
6.How are government agencies preparing?
The White House and some federal departments already have started to buckle down to prepare for the eventuality that sequestration will go through. Deputy Secretary of Defense Ashton Carter recently told the Senate Armed Services Committee that the Pentagon had cancelled deployment of the aircraft carrier U.S.S. Harry S Truman to the Middle East. The Navy has said that it would delay repairs to the submarine U.S.S. Miami. But officials have assured defense contractors that standing deals will be honored. Future contracts, however, could be imperiled. Other federal departments may be able to shift some funds around within their department from lower priority activities where funds were not cut to higher priority activities that are hit by the sequester.
7. What may the long-term effects be?
This is where it starts to get really political, because it depends on who you ask. To debt hawks, a force-fed fiscal enema like sequestration may be just the purgative a bloated government needs, and they argue it would be good for the economy in the long run. But outside that circle, the economic consequences don't look so good. The Bipartisan Policy Center says that the American economy may stand to lose 1 million jobs if the full package of cuts goes ahead on schedule. And the Congressional Budget Office noted that the planned cuts will act as a drag on the country’s overall economic growth over the coming fiscal year. The long-term economic ramifications of sequestration may take years to unfold in the lives of ordinary Americans if the cuts go ahead, but for legislators who can't figure out a better way to implement the cuts, the political blowback could come much more swiftly.
8. What can be done to stop it?
With both chambers of Congress on what House leaders call a “District Work Period” this week – also known as a recess – Democrats have called on Republican House leaders to reconvene and strike a deal. Speaker of the House John Boehner has said he’s opposed to the cuts, and has made the case it's up to the White House to break the impasse. Republicans have said they will only agree to a deal to avert the cuts if it includes a plan to cut an equivalent amount of government spending in more orderly fashion. Senate Democrats are backing a plan that includes new revenue generated by closing tax loopholes for the richest Americans. With the clock ticking down, the debate is beginning to resemble the one that set up this manufactured crisis in the first place.
NBC News' Tom Curry contributed to this report.