Why March 1 isn't Congress's last chance to amend 'sequester' cuts

Talk about your March madness. Two whirling-dervish fiscal issues are bearing down on Washington, and a couple of March deadlines mean that next month is likely to determine whether dealmaking will give Americans a breather from tax-and-spending fights – or whether intractability results in a federal government shutdown.

A key question is whether these two issues – 1) the much-maligned “sequester” and 2) funds to run the government for the second half of the fiscal year – will proceed on separate tracks, or merge onto one. The fuzzy expectation is that they’ll merge, and that the task of replacing the first with something better will be absorbed into second. Call it a two-fer.

But some say such a merger risks yet another fiscal battle royale – including the possibility that the sequester’s crimp on the economy would be followed by something much worse.

To head off doubling down on crisis, House Appropriations Committee Chairman Harold Rogers (R) of Kentucky is working to keep the two fiscal issues as far apart as possible.

“He thinks sequestration cuts alone are terrible,” said a Republican House aide familiar with Chairman Rogers’ thinking. “Having a full government shutdown on top of that would be more than the nation could bear.”

Let’s backtrack for a moment, just to make sure everyone’s clear about the March itinerary.

First up, on March 1, is the sequester, that package of $85 billion in automatic spending cuts that has created a buzz about looming air-travel delays, cuts in student aid, furloughs for defense workers, fewer detentions of illegal immigrants, limited access to national parks, and so on. Though almost no one likes the sequester’s across-the-board approach to the cuts, it looks as if Congress will not agree upon a different way to come up with the $85 billion by the end of this month.

But the nation will get a little grace period before most effects of sequestration are felt. That’s because government employees being furloughed need to receive roughly a month’s notice and because some military spending can likely be jostled around to prevent deep disruptions for a few weeks. Hence, lawmakers are expected to begin serious negotiations during the first two weeks of March to adjust – or perhaps even replace – the sequester.

Meanwhile, funds to operate the government run out on March 27, the midpoint of the fiscal year. Congress needs to appropriate money to the various agencies and departments or, voilá, a shutdown. But how much money is always the rub. Lately, Congress has been opting to simply continue funding at levels set by the 2011 debt-ceiling deal, the Budget Control Act.

It’s not a giant leap of logic to see that any revised package of sequester cuts could be rolled into bills designed to keep the government’s lights on for the rest of the fiscal year – the very period over which the first of the sequester cuts will take effect. Such reasoning leads Pete Davis of Davis Capital Investment Ideas, a former staff member of the Senate Budget Committee, to proclaim that March 27 is “the real deadline” for Washington’s sequester decisions.

“If there’s a deal to fund the government” through Sept. 30, says Mr. Davis, “it’s almost a no-brainer to add a sequester replacement to it.”

But Rogers, for one, is determined not to conflate the sequester cuts and the government-funding bills – and early signs are that Democrats in Congress may, warily, go along with that.

“The chairman’s intention is to keep the two things separate. That’s the reason he has proposed this as early as he has,” says the House Republican aide, whose name is not being used because he spoke on background. Rogers “is doing what he can to take this one issue [of a possible government shutdown] off the table, so [House GOP] leadership and the White House and the powers-that-be can be can continue to negotiate on the other looming problems.”

Rogers plans in coming days to introduce legislation that would fund the government through Sept. 30 at the reduced spending levels stipulated by the 2011 debt-ceiling deal, according to the aide. Rogers’ bill will account for the $85 billion in sequester cuts, but will only make the slightest tweaks as to how the cuts would be administered under the current government funding authorization.

His plan will introduce some policy changes at the Defense Department, in veterans affairs, and on military construction – agreed to by both chambers of Congress in prior appropriations bills – that would make the sequester cuts easier for some to swallow in those three areas. All nondefense spending for the rest of fiscal 2013 would be funded at the levels stipulated in 2011 via a “continuing resolution” that freezes budget priorities in place.

Of course, a proposal that helps the Pentagon but not other programs such as education and social services seems ready-made to raise Democratic hackles. But Rogers has run his proposal past the top Democrat on the Appropriations Committee, Rep. Nita Lowey (D) of New York, and the Senate’s top two appropriators, Sens. Barbara Mikulski (D) of Maryland and Richard Shelby (R) of Alabama. None gave full assent to the Rogers proposal, but the discussions did not brook “strong opposition,” says the House Republican aide.

Moreover, Senate majority leader Harry Reid (D) on Tuesday did not shoot down the forthcoming GOP proposal, saying he is "anxious" to see what House Republicans would offer on government funding.

Some of the most conservative House Republicans, many of whom have previously bucked their leadership on government funding votes, noted in a discussion with reporters on Wednesday that they would probably support a proposal like Rogers,' assuming there is no last-minute chicanery.

House Democrats are aware of Rogers’ plans, says a House Democratic aide, who was noncommittal about the scope of bipartisan support for them.

What is the Democrats’ chief concern? They are wary that congressional Republicans will shift the across-the-board spending cuts required by the sequester, which happen by default, into targeted cuts – and then hand that responsibility for slashing programs over to the president and cabinet secretaries.

Senate minority leader Mitch McConnell (R) of Kentucky, among other congressional Republicans, has endorsed giving the executive agencies and the White House greater flexibility to apportion the sequester cuts as they see fit.

Such a move would be perceived by Democrats as “pretty blatantly political,” says the House Democratic aide. Republicans “want the White House to shoulder all the blame for when the cuts come,” the aide says.

But the reality is that the government funding debate is intertwined with the sequester debate, and so Rogers’ bid to head off the government funding crisis – and leave the sequester out of it – would be no simple trick. If his shutdown-aversion plan were to succeed, it would be the second time in as many months that Republicans have stepped back from an action that could take the US economy to a potentially debilitating threshold. Previously, GOP lawmakers abandoned a prior tactic of haggling over the national debt ceiling by voting to put off debate on the subject until late summer.