Lawmakers Reset for Sequester Fight in March

The tax agreement legislation postpones the sequester by applying a portion of the revenue raised by the bill and some undisclosed spending cuts to pay for the proposed sequester cuts over the next two months. The White House said the delay will give Congress more time to “work on a balanced plan to end the sequester permanently through a combination of additional revenue and spending cuts in a balanced manner,” according to an official statement. Administration officials said last year that if the sequester took effect it would have a significant, negative impact on federal employees, private industry and the economy as a whole (CD Sept 17 p4). In addition to steep agency funding cuts, $95 billion of federal research and development funding remains in peril under the threat of sequester.

President Barack Obama said in a speech Tuesday night “there will be more deficit reduction as Congress decides what to do about the automatic spending cuts” (http://xrl.us/bn8w9i). Obama said he believed there is “further unnecessary spending in government that we can eliminate, but we can’t simply cut our way to prosperity ... and we can’t keep cutting things like basic research and new technology and still expect to succeed in a 21st century economy.”

On Tuesday Congress voted to extend the research and experimentation tax credits, which give companies a subsidy for some research spending through the end of 2013. The Information Technology and Innovation Foundation (ITIF) in blog post Tuesday (http://xrl.us/bn8wwf) hailed the tax credit extension and commended Congress for sending a “strong signal to our economic competitors that the United States is serious about maintaining our global leadership in innovation.” Telecommunications Industry Association President Grant Seiffert also applauded in a news release the tax credit extension, which he said “has been, and will remain, a cost-effective policy for increasing research activity and producing a dollar-for-dollar increase in research spending.” HR-8 also extends for one year special expensing rules for certain film and television productions.

House and Senate Republicans said they're now preparing to rein in the government’s spending as the new sequester deadline nears. Senate Minority Leader Mitch McConnell of Kentucky said during a floor speech Tuesday night “now it’s time to get serious about reducing Washington’s out-of-control spending. ... That’s a debate the American people want. It’s the debate we'll have next. And it’s a debate Republicans are ready for.” Speaker of the House John Boehner, R-Ohio, said House Republicans will seek “significant spending cuts” in 2013, according to a separate news release. House Budget Committee Chairman Paul Ryan, R-Wis., said in a news release Congress must now “return our attention to the real problem: out-of-control spending."

Democrats said they were disappointed that Congress failed to forge a larger agreement to avert the sequester. Senate Appropriations Committee Chair Barbara Mikulski, D-Md., said during a floor speech the sequester’s “across-the-board meat ax approach has very serious consequences. ... If, in fact, we go into this meat ax approach, over 7,500 positions will be cut.” Federal employees “might not be laid off but they are going to be furloughed. This is going to have a direct impact on morale, a direct impact on mission and it will have a direct impact on protecting the American people, whether it’s from cyberthreats, border control threats and all the ways they protect us,” she said. House Minority Leader Nancy Pelosi, D-Calif., said in a separate statement Congress must seek “equal parts revenue and spending cuts as we work to reduce our deficit.” House Budget Committee Ranking Member Chris Van Hollen, D-Md., said it was “unfortunate that we were not able to do a larger plan on deficit reduction,” but Democrats will “continue to fight for a balanced approach as we work to get our fiscal house in order.”

The FCC said it had not issued any new guidance to its employees on the sequester’s delay. The agency had previously issued employee guidance saying if the sequester took effect Wednesday it “wouldn’t be different than when we have a lapse in budgets or a lapse in funding,” Human Resources Director Bonita Tingley told us Wednesday. “Employees would know that they needed to report to work and we would share information as soon as it is available,” she said. The FCC’s budget for salaries and expenses would be cut 8.2 percent, equal to roughly $28 million, if Congress doesn’t act to stop sequestration, OMB said last year. USF is exempt from the sequester, but the FCC’s spectrum auction program account would undergo a 7.6 percent cut, or $300,000.

The National Treasury Employees Union (NTEU) bemoaned in press statements this week the “continued uncertainty” the sequester creates for the 150,000 agency employees it represents, including those at the FCC and Commerce Department. NTEU President Colleen Kelley urged Congress to take action to avoid the “devastating impact of the indiscriminate cuts. ... The fiscal cliff bill delays, but does not end, the severe threats posed by sequestration. If federal agencies and their employees do not have the resources and tools they need, the public that depends on them will suffer.”

The National Federation of Federal Employees (NFFE) is continuing to “prepare for the worst,” said Communications Director Cory Bythrow Wednesday. NFFE represents workers at the Department of Agriculture, which includes the Rural Utilities Service. “As far as sequestration, we are absolutely preparing our people for the worst,” said Bythrow. “You have to prepare for the worse, otherwise you will be caught blind sighted.” If the sequester is not averted in March, RUS would be forced to cut $3 million from the rural electrification and telecom loans program account, and $3 million from RUS’s budget for distance learning, telemedicine and broadband programs.

NFFE has not issued any official furlough bargaining guidance, said Bythrow, but it’s encouraging agencies to begin discussions about how employee furloughs would be done if the sequester is not averted. The Office of Management and Budget issued guidance last year, he said, and “if the sequester does go into effect in March we are expecting that to be the similar plan of action.” OMB did not comment. “You can only kick the can so far down the road,” said Bythrow. “Who knows? Maybe they will find another way to delay it. But it is going to be interesting to see how this plays out now that the Bush tax cuts are off the table.”