Will a fight over defense spending blow up the sequester?

by Dylan Matthews, Washington Post 
click here for original article

Turns out Republicans aren’t willing to cut defense down to sequestration levels after all.

On Tuesday, the House passed H.R. 2216: Military Construction and Veterans Affairs, and Related Agencies Appropriations Act, 2014, which allocates more money to defense than allowed under the law. Implicitly, the idea is that the increase in defense spending will be paid for by further cuts to domestic spending.

The Obama administration on Monday threatened to veto the bill, arguing that the cuts would “result in hundreds of thousands of low-income children losing access to Head Start programs, tens of thousands of children with disabilities losing Federal funding for their special education teachers and aides, thousands of Federal agents who can’t enforce drug laws, combat violent crime or apprehend fugitives, and thousands of scientists without medical grants.” House Speaker John Boehner shot back, saying the White House was effectively threatening to shut down the government unless it got more spending and taxes.

This is an important fight that could, as Boehner says, end in a government shutdown — or it could end in a resolution that unwinds sequestration. But it’s brutally complicated and requires an understanding of one of the budget debate’s most confusing facts: There are really two sequesters.

Double sequestrations, all the way across the sky

We talk a lot about the “sequestration” or “sequester” around these parts. But I’ll let you in on a little secret: There are actually two sequestrations. That’s right, double sequestrations, all the way across the sky.

The one you’re probably most familiar with — the one people normally mean when they say “sequestration” — is what Center for Budget and Policy Priorities analyst Richard Kogan refers to as the “supercommittee sequestration”. That’s the $1.2 trillion in cuts, split evenly between defense and non-defense programs, that were triggered by the failure of the supercommittee to agree on a deficit reduction plan.

But there’s also what Kogan calls the “cap sequestration.” And that’s where it gets complicated. The Budget Control Act (BCA) set statutory caps on discretionary spending through 2021. There are separate caps for defense and non-defense spending.

The two sequestrations interact a bit. For 2014-2021, the supercommittee sequestration’s cuts to discretionary spending work by lowering the discretionary caps used in the “cap sequestration,” rather than by mandating budget cuts through a separate process. So going forward, the caps are going to be where the action is for discretionary spending.

This table by Loren Adler and Shai Akabas shows how that works. Before the supercommittee sequestration takes effect, the caps for 2014 are $552 billion for defense and $506 billion for non-defense. But after sequestration, the caps are reduced to $498.1 billion and $469.4 billion, for a total cap of $967.4 billion:

How do we get out of this?

Democrats have responded to all this by making plans for the sequester’s replacement. The Senate Democratic budget, for procedural reasons, caps discretionary spending at the $967.4 billion level, and keeps the caps of defense spending at $498.1 billion and non-defense spending at $469.4 billion.

But the budget assumes those caps will change. If the sequestration is nullified or otherwise replaced, then under the budget, the caps change to $552 billion for defense and $506 billion for the rest, just as they were before the supercommittee sequestration took effect. Repealing the sequester changes the caps, in other words. The budget really plans on $1.058 trillion in discretionary spending, not $967.4 billion.

Republicans like that $552 billion pre-sequestration figure for defense spending. But they also like the $967.4 billion figure for overall discretionary spending. So Rep. Paul Ryan’s budget includes both. It caps defense spending at $552 billion and non-defense spending at $414 billion. That’s a 11.7 percent cut in non-defense discretionary spending, relative to current caps, and an 18.2 percent cut relative to Murray. Adler and Akabas also summarize this well:

And House appropriators are following his lead. H.R. 2206, the bill passed on Tuesday, was introduced by the chairman of the House Appropriations subcommittee on Military Construction, Veterans Affairs, and Related Agencies, John Culberson (R-Tex.), and backed by Appropriations chairman Hal Rogers (R-Ky.). It provides substantially more defense spending than is allowed under the caps and implicitly shifts the cuts implied under the caps to non-defense discretionary programs, as there would be no other way to meet the overall cap. The cuts to those could be enormous, as this chart from CBPP demonstrates:

If the appropriations bill passed without a corresponding change in the Budget Control Act, the defense spending cap in that bill would still apply. So defense spending would be sequestered back to $498.1 billion, a 10 percent cut relative to the GOP budget’s cap, and a cut from 2013 spending levels. The House GOP approach sets up large cuts to non-defense discretionary spending, but barring alterations to the statutory caps it wouldn’t even succeed at increasing defense spending.

A Republican aide I spoke to concedes as much, saying that the House GOP assumes that the caps for defense and non-defense spending will be altered before the end of the year. A defense bill set to the BCA caps, the House leadership concluded, would be harmful for national security.

However, since the House can’t pass any bill that doesn’t conform to House budget caps,  there must be a conference committee wherein House and Senate conferees agree on common caps and then pass joint legislation changing them to the final level. And Senate Democratic aides say Democrats will not agree to a plan that keeps discretionary spending at $967.5 billion a year. “We think the sequester should be replaced, fully, with more responsible savings including new revenue,” Eli Zupnick, a spokesman for the Senate Budget Committee, says. “The Ryan budget simply shifts all the burden onto non-defense, and that’s a nonstarter with us.”

It’s been a while since Congress passed a formal budget. But it can’t function if it doesn’t agree on spending, either by passing continuing resolutions or passing appropriations bill. And it looks like a big divide is opening up between House Republicans and Senate Democrats on whether increased defense spending should be paid for out of domestic spending, or out of a combination of cuts and tax increases.

If that can’t be hashed out by Sept. 30, we could be looking at a government shutdown.

This post has been edited to clarify the spending levels of the Senate Democratic budget.