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Sequestration Is Upon Us: Now What?


"Good morning. If you are reading this, then the world did not end at midnight as President Obama predicted it would."

President Obama. (Getty Images).

Well, it's March 1. This means the U.S. is officially sequestered, right? Let's take a look at this.

Yes, as part of the Budget Control Act of 2011 passed by Congress, and signed off by the president, the U.S. government is scheduled to automaticaly slash $85 billion from its annual budget (about 2.4 percent of the total budget).

But this is important to note:

The White House Office of Management and Budget has until 11:59 p.m. Friday to actually issue the official sequestration notice that starts the entire process. That’s also when OMB will  transmit a report to Congress detailing cuts in every affected agency’s budget account. Obama must actually issue an order to trigger OMB’s actions...

The president is meeting with congressional leaders Friday morning to see if a deal to avert sequester can be reached. But we pretty much know how that's going to end, don't we?

So now that these “deep” and “painful” spending cuts are upon us, how are people reacting? We're glad you asked. Here’s a cross section of the reaction to the March 1 deadline:

The Associated Press:

Some $85 billion in cuts are due to take effect today as part of a previous

budget agreement between the White House and Congress. The planned "sequester" could hit U.S. growth if no deal is reached to avoid it. The International Monetary Fund has estimated that it could shave around 0.5 percentage point off U.S. growth this year.

Though relatively minor, certainly in comparison with what could have happened if U.S. lawmakers didn't cobble together a deal to avoid the so-called "fiscal cliff" of automatic spending cuts and tax rises at the end of 2012, the debate over the "sequester" has highlighted the scale of divisions in Congress.

A collection from Newser:

1) Congress has already left town for the weekend. "I think the sequester is crazy," Rep. Peter King told CNN as he headed back to New York yesterday. "But just to sit here by myself serves no purpose."

2) Most Americans won't feel any immediate impact, the Times reports, and so far it's unclear where exactly the axe will fall. Pressed yesterday to name which services or contracts the cuts might hit, Jay Carney could muster only that the sequester would reduce funding for school children in Ohio.

3) Most of the pain will only gradually roll over Americans, CNN Money explains. Starting today, agencies will limit their contracts and grant awards, but furloughs won't take effect until March 26 or later—the IRS, for instance, has said it won't furlough anyone until after the April 15 tax filing deadline, the Washington Post reports.

4) Republicans want to lock in spending at post-sequester levels; Democrats are expected to go along with the spending levels, and focus their fight on individual spending priorities, the Wall Street Journal reports.

In an investor note, Deutsche Bank's chief U.S. economist, Joseph LaVorgna, said the sequester could take 40 basis points off 2013 gross domestic product, "and possibly higher, depending on whether the fiscal multiplier is positive".

"However, we believe there is a good chance that sometime over the next few weeks, the Administration and Congress will water down these spending cuts," LaVorgna added. "This will be the compromise necessary to extend the continuing resolution which funds the government, but expires on March 27."


While lawmakers in Washington trade shots over the $1.2 trillion in automatic spending cuts, due to take effect Friday, there's a growing consensus among liberals across the country that the real threat to the social safety net isn't this fight, but the next one.

As originally designed in 2011, the deficit-reduction sequester splits cuts between defense and domestic spending, and explicitly exempted programs like social security and Medicaid. But no one in Washington believes the sequester cuts will be permanent, and liberals worry the deal Congress eventually reaches to replace it will slash funding to those programs — as Republicans and some Democrats have advocated.

The Washington Examiner:

Good morning. If you are reading this, then the world did not end at midnight as President Obama predicted it would. The federal government has begun to cut almost 2 percent of its projected budget and civil society has not collapsed.

Not that many Americans believed Obama anyway. According to the latest Gallup poll, 37 percent of Americans believe Congress should let the scheduled sequestration cuts go into effect. Another 40 percent of Americans told Pew the same thing, as did 46 percent of those polled by MSNBC.

America is just not that concerned about the Navy being forced to cut back on sports stadium flyovers.


Automatic across-the-board spending cuts, known as sequestration, will be introduced on Friday. Many economists expect those budget cuts may reduce U.S. economic growth by around half a percentage point.

"The risks are to the downside in part from the potential additional fiscal drag from the sequestration," said Michael Pond, head of global inflation-linked research at Barclays Capital, in New York.


As Washington braces for automatic spending cuts, small businesses in the military town of Colorado Springs say they have been losing government business for months.

The general uncertainty facing federal agencies has trickled down to the companies that rely on federal contracts.

"Small businesses are telling us that their government contracts are either frozen, not being renewed or canceled in anticipation of budget cuts," said Kelly Manning, state director of the Colorado Small Business Development Center network.

So there you have it. The reaction has been a mixture of worry, disinterest, and cynicism.

Senate Majority Leader harry Reid (D-Nev.) (Getty Images)

Oh, also, for those suggesting that $1.2 trillion in cuts are due today, that’s note exactly accurate -- only $85 billion is slated for FY2013. Also, in case you’re really enjoying all this hand-wringing, there's more where that came from. The cuts aren’t actually scheduled to kick in until March 2, according to the Office of Management and Budget.

So, yeah, you have at least another 24 hours of this.

Follow Becket Adams (@BecketAdams) on Twitter

Featured image courtesy Getty Images. This post has been updated.

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