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Thu February 28, 2013
$85 Billion Versus $42 Billion: The New Sequester Argument
Originally published on Thu February 28, 2013 2:01 pm
Just how much will the sequester cut? It depends on whom you ask.
The White House has been saying spending will be reduced by $85 billion this year, unless the automatic spending cuts set to take effect Friday are averted.
The Congressional Budget Office, however, just released a new report saying the cuts will only amount to $42 billion.
Why do they differ so much?
They don't, really. It's a technical difference, more than anything.
The White House figure refers to how much money agencies have permission to spend (which is known as budget authority), while the CBO is looking at the amount they'd actually spend this year (outlays, in budget-speak).
It's kind of like your credit card. Your limit says you can spend $1,000, but you end up only spending $500. The difference is that once Congress gives agencies budget authority, they will spend all the money eventually — maybe just not in the same year that they were given permission to do so.
It may take more than a year to build a bridge, for example, even if all the money to pay for it was approved in the first year.
As a result, not all of the $85 billion would have been spent this year, even if sequestration weren't to happen, CBO explains: "Some would have been used to enter into contracts to buy goods or services to be provided and paid for next year or in subsequent years. Acquiring major weapons systems and completing large construction projects, for example, can take several years."
The reduction in spending due to the sequester may not happen all at once, but it will result in smaller disbursements over time, says budget consultant Chuck Konigsberg, a former Democratic Senate aide.
"In programs where most of the funding is for personnel, most of the outlay reductions will occur in the current fiscal year," Konigsberg says.
This may just be an argument only an accountant could love. Still, there is a difference between $42 billion and $85 billion.
Choosing the larger budget authority number is an example of the White House trying to paint a dark picture of sequestration's effects, says Rich Meade, a former Republican staff director of the House Budget Committee.
It's better to use the CBO numbers, he says, because then you're talking about the cash the government is actually spending — or not spending — in any given year.
"I've become increasingly frustrated by the way the White House has been portraying the effects of sequestration," Meade says. "There will be notable changes in government, but it's not going to be cataclysmic, as they want to make you believe."