Retroactive repeal of sequestration possible -- but risky

Impact from the devastating federal budget cuts that could be imposed by sequestration come Jan. 2 could be mitigated, a new analysis suggests, but it is questionable how effective those efforts would be.

Federal agencies currently remain in a state of limbo as government leaders appear either confident, or at least hopeful, that a last-minute deal will avert the 10 percent across-the-board cuts. Even if the lame duck session fails to produce an agreement that nullifies the measure, mandated in last year’s Budget Control Act, there is a strong possibility that sequestration could be retroactively rolled back later in 2013.

That retroactive repeal, combined with strategies that delay initial implementation of the temporary sequestration’s cuts, could mean the effects may be felt only minimally or not at all by agencies. The executive branch has the power to mitigate the cuts and how they affect agencies, according to OMB Watch.

Should there be a failure to avert sequestration before Jan. 2, “if the administration chooses to take action to lessen its impacts, and if it lasts just a few weeks and is retroactively canceled, then there would be minimal or no damage to most affected federal defense and non-defense programs,” Patrick Lester, OMB Watch’s fiscal policy director, wrote in the report. However, repealing sequestration retroactively would still require agreement between Congress and the president, Lester warned.

There are a number of different strategies that could be used to minimize a temporary sequestration’s influence on agency programs. Among them are apportionment authorities that allow the administration to control the rate of federal spending; the use of carryover funds; redirection of funds to higher priorities; accelerating spending to avoid furloughs and layoffs; and delaying new contracts and grants in order to fund existing ones.

But without a deal to avert sequestration on the table, those measures – particularly the delays – are a gamble, according to Todd Harrison, senior fellow in defense budget studies at the Center for Strategic Budget Assessments.

 “If implementation gets delayed in hopes that sequestration won’t go into effect, it could end up being worse in the end,” Harrison said. “The sooner you start making reductions, the less disruptive the cuts will be. Or it could end up being a case of kicking the can down the road and hoping to get bailed out.”

For example, if agencies end up waiting until halfway through the fiscal year, they’ll have to cut 20 percent for the remainder of the year in order to meet the 10 percent requirements for fiscal 2013, Harrison noted.

Similarly, accelerating spending to avoid furloughs could backfire if a deal is not reached, forcing agencies to make even deeper cuts into the workforce to meet the reduction requirements.

Given that sequestration is happening because Congress failed to reach a deal to begin with, it is hardly unthinkable that efforts to reverse sequestration could also fail. If agencies go forward without budget-cut plans, they could be backed into a corner, Harrison said.

Furthermore, if agencies are not feeling the pain of the drastic budget cuts, it may hinder the impetus on Congress to address the problem.

“What will motivate Congress to make changes if they’re delayed? Why change if no one is feeling the impact? That sense of urgency might not be there,” Harrison said.

In the OMB Watch report, Lester points out that a sequestration lasting anything longer than a few weeks, those impacts will definitely start to be felt and cuts to programs and jobs will start to materialize.

“In its September report to Congress, the Obama administration labeled sequestration ‘a blunt, indiscriminate instrument and not a responsible way to make policy.’ This judgment remains true,” Lester wrote. “If triggered, the worst effects of sequestration may be avoided temporarily – long enough for Congress to consider alternatives – but they can only be postponed for a while.”