What is Sequestration?

Published by Thomas Herold in Accounting, Economics

'Sequestration' is explained in detail and with examples in the Economics edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

Sequestration refers to the package of cuts to the Federal government’s budget which became effective on March 1st of 2013. More precisely, the phrase pertained to the method of budgeting in which the drastic cuts would be put into place. The sequester, or super committee sequestration as it was fully known, also extended beyond 2013 from 2014 to 2021.

Congress set themselves up for the fiscal devastation of the Sequestration with their short-sighted Budget Control Act of 2011, also known by its acronym of BCA. Most people simply called it the debt ceiling compromise. The original idea behind such a wide ranging and long-term effects bill was to goad the Joint Select Committee on Deficit Reduction, better known as the Super committee, to arrive at a compromise on cutting out $1.5 trillion in spending over the period of ten years. Had the committee succeeded with this goal and Congress approved it by December 23rd of 2011, then no Sequestration would have taken effect.

Instead, as many would expect, Congress could not pull itself together to approve the recommended cuts from the Super committee. This resulted in the Sequestration taking effect in 2013, much to the undying regret of both Republicans and Democrats in the House and Senate. What resulted was a series of severe cuts which became evenly split between defense and domestic programs. Half of them affected defensive discretionary spending such as base operations, weapons systems purchases, and military facility construction work, reducing the military’s fighting edge in many ways. The remainder impacted discretionary domestic spending along with mandatory programs which potentially included Medicaid, the unemployment trust fund, and Social Security payments.

In practice, they agreed that Social Security and Medicaid along with low income programs such as the SNAP Supplemental Nutritional Assistance Program (food stamps) and TANF Temporary Assistance for Needy Families (welfare) would be exempt from the Sequestration. Other low income programs though were potentially targeted in the cuts. These included WIC the aid for Women, Infants, and Children along with Section 8 housing vouchers and LIHEAP the Low Income Home Energy Assistance Program.

For 2013, the following programs were cut by these drastic dollar and percentage amounts. Defense suffered from a $42.7 billion cut for 7.7 percent. Domestic discretionary cuts amounted to $26.1 billion for 5.1 percent. Medicare took an $11.1 billion hit amounting to two percent that year. Other mandatory program cuts equaled $5.4 billion for a 5.2 percent cutback. This equaled the total required $85.3 billion of mandatory cuts which the Congressmen had set forth in their own Sequestration.

The worst of the news did not even take effect in 2013 though. The caps for the budget years from 2014 to 2012 were set to cut out even more at $109.3 billion per year. Congress each year got to determine whether they would pinpoint the cuts by agreement or simply suffer the mandatory pre-programmed across the board drastic reductions to which they had unintentionally agreed back in 2011.

On the positive side, no programs actually suffered from elimination because of the notorious Sequestration. The goal was instead to scale back the scope and price tag of the already existing programs, not to completely obliterate any of them. Despite this better news, the bad news came from the think tank Third Way. It estimated that around 1.8 million people lost or will lose their positions because of the non-defense category cuts.

Here are some of the larger specific program cuts for 2013. Military operations across the four branches of the service plus the National Guard and the Reserves were slashed by $17.1 billion. Military research for the year saw its budget crushed by $6.1 billion. The National Institute of Health suffered from a $1.6 billion cut as well. Border security took a hit to the tune of around $595 million, while airport security suffered a loss of $276 million and immigration enforcement saw $295 million eliminated.

The Centers for Disease Control and Prevention similarly lost $303 million in Federal funding for 2013. FEMA disaster relief lost $928 million, while public housing support suffered a drop of $1.74 billion. NASA lost $896 million, while the Energy Department’s Securing Nuclear Weapons programs lost $903 million.

Special Education lost $827 million and the Head Start program suffered a drop of $400 million. The FBI lost $556 million while the diplomatic functions of the State Department lost $665 million. Even Global Health programs dropped by $411 million, while the National Science Foundation lost $361 million.

Free Download (No Signup Required) - The 100 Most Important Financial Terms You Should Know!
This practical financial dictionary helps you understand and comprehend the 100 most important financial terms.

The term 'Sequestration' is included in the Economics edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.