Sequester Deadline Quickly Approaches

February 27, 2013

pic-money-collageThe $85 billion in cuts set to begin on Friday, March 1, are just the first installment of the sequester’s $1.2 trillion in across-the-board reductions over the next decade. These first-year cuts were supposed to hit on Jan. 1, but lawmakers were able to delay them until March 1 by finding other specific cuts and some new revenue, thus bringing the total left to be cut this year down from $109 billion.

These cuts to military and domestic discretionary spending are to be carried out over the next seven months—by the Oct. 1 start of the new fiscal year—but the impact may begin to be felt immediately. If implemented in its current form, the sequester will have a disproportionate impact on our nation’s small business prime and subcontractors, and would deal a critical blow to some of the U.S. Small Business Administration’s (SBA) programs that serve an important need in the U.S. economy.

The Congressional Budget Office has projected the sequester could eventually cost 750,000 jobs in 2013 and reduce the gross domestic product by half a percentage point. Federal agencies have been in the planning stages for the sequester for months.

Opinions on how to address the sequester predictably fall along party lines. Congressional Republicans generally have insisted on replacing the across-the-board cuts with targeted spending reductions that are more heavily weighted toward non-defense spending. President Obama and congressional Democrats argue for what they have called a “balanced” approach that includes spending cuts plus revenue from tax increases. As the March 1 deadline approaches, neither side shows signs of softening their respective positions.

President Barack Obama will hold a White House meeting on Friday to discuss plans to avoid the sequester cuts with House Speaker John Boehner (R-Ohio), Minority Leader Nancy Pelosi (D-Calif.), Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.). This will be the first face-to-face meeting with Congressional leaders, however, technically by then, we will have already hit the March 1 deadline.

Senate Democrats and Republicans were originally planning to have side-by-side votes this week on competing plans for dealing with the sequester. However, a split among Senate Republicans over what to propose as a substitute for the sequester has complicated that plan. The competing proposals were to be considered under an agreement requiring 60 votes for passage, meaning both are practically certain to be defeated. Democrats were expected to offer a $110 billion proposal to replace the automatic cuts with a package that would increase taxes on people with income higher than $1 million, eliminate some farm payments and restructure defense cuts. Reid set a procedural vote for no later than Thursday to call up the Democratic proposal, but Republicans are expected to block a vote on the plan.

In the House, Republican leaders have made it clear that they will not consider any sequester replacement plans until the Senate acts. House leaders have repeatedly noted the chamber passed two sequester substitutes last year that would have replaced the automatic cuts in defense agencies, largely making deeper cuts in entitlement spending.

NSBA has urged Congress and the administration to work towards a solution to addresses these looming spending cuts and give small businesses the certainty and stability they need to create jobs and maintain positive economic growth.

Please click here for more from NSBA on the sequester.