OMB warns of consequences if sequestration returns in 2016

The Office of Management and Budget tells Congress if it doesn't fix sequestration, discretionary spending across the government would drop by more than $90 bil...

The White House is warning Congress and agencies that if cuts from sequestration return in fiscal 2016, the impact would be great.

In a report sent to Congress on Feb. 2, but posted only in the last week or so, Shaun Donovan, the director of the Office of Management and Budget, wrote that if lawmakers don’t act, agencies would have to reduce their discretionary budgets by more than $90.4 billion.

Shaun Donovan
“Based on the estimates in that report, the defense cap is required to be reduced by $53,909 million and the non-defense cap is required to be reduced by $36,509 million. These adjustments are made to the respective current law caps,” Donovan wrote. “… OMB will be required to implement reductions to the discretionary caps when it issues preview reports for future years unless legislation is enacted to cancel the Joint Committee reductions.”

Defense discretionary spending would drop to $523 billion from $585.8 billion in 2015, while non-defense discretionary spending would drop to $493.5 billion from $514.1 billion.

“However, the cap reductions that are now required by law to resume in 2016 do not provide sufficient resources for national security, domestic investments, and core Government functions that are required to ensure the Nation is achieving its full potential in a growing economy. With the return of Joint Committee reductions, base discretionary funding in 2016 would be at its lowest level in a decade when adjusted for inflation,” the report stated. “The President’s 2016 Budget builds on the progress made with the enactment of the BBA and the framework included in the 2015 Budget by including several proposals to revise the discretionary caps.”

OMB is required under the Budget Control Act to submit a report to Congress three times a year detailing potential and actual discretionary budget reductions.

The 2014 Budget Control Act reduced the defense caps by $53.9 billion and the non-defense caps by $36.6 billion, and restored $44.8 billion to both categories last year. For 2015, Congress reduced the defense cap by $44.7 billion and the non-defense cap by $27.6 billion from the original BCA levels. But lawmakers took no action around budget reductions as called for under the Budget Control Act for 2016 to 2021.

OMB didn’t estimate the impact of cuts from sequestration after 2016.

The White House began preparing agencies for reduced discretionary budgets in 2016 through its annual planning guidance. OMB told agencies last May to use data to inform their 2016 requests. OMB required agencies to submit discretionary requests that were 5 percent less than what they asked for in 2015.

In the President’s 2016 request to Congress, Obama made the case to increase discretionary spending, but find cuts in other places. OMB reiterated those proposals in this latest sequestration report.

“The budget proposes to restore discretionary spending to levels that would continue to support economic growth, opportunity, and safety and security. These investments will be offset by a balanced package of spending cuts, tax loophole closers, and program integrity measures included in the budget,” OMB wrote in the report. “In addition to cancelling the 2016 mandatory sequestration order and replacing the automatic mandatory reductions required in future years, the 2016 Budget adjusts upward the 2016 through 2021 defense and non-defense caps from where they otherwise would be under Joint Committee reductions. The outyear cap increases — which are shown as reductions to the preview report spending limits since those limits have yet to be reduced pursuant to section 251A of BBEDCA — will provide modest growth for discretionary investments. Even with these investments, discretionary spending will still reach its lowest level on record as a share of GDP.”

In January, the administration told Congress further budget reductions under sequestration for 2015 would not be needed.


No sequestration cuts in 2015, OMB says

OMB tells Congress sequestration cuts aren’t needed in 2014

Highlights of President Obama’s 2016 budget

Data to drive 2016 discretionary budget decisions

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