White House has some flexibility in choosing $85B spending cuts

The White House says its hands are tied by the $85 billion sequester, but budget experts counter that it will have some flexibility to choose what to cut and what to save.

The wiggle-room is inviting accusations from Congress that President Obama is mismanaging the cuts.

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Critics also say the flexibility could allow the administration to make the cuts more painful, in order to pressure congressional Republicans to raise taxes as part of a sequester-replacement. Some of these critics point to the decision to not deploy an aircraft carrier to the Persian Gulf.

The White House has made the case it has almost no flexibility given the sequester’s requirement that it cut domestic discretionary spending by 9 percent and military spending by 13 percent.

“What happens is, OMB, we take this amount, this $85 billion that we have to cut, and we apply it to every account in government,” Office of Management and Budget Controller Danny Werfel told reporters.

Within each of those accounts are subaccounts known as “program, project and activity” which also are subject to specific cuts, he said. This limits the administration’s flexibility even further.

But budget experts say some nuances within the law do give the administration some room to maneuver, though they acknowledge it is limited.

For example, the administration has broad authority to define “program, project and activity,” according to Barry Anderson, a former budget official under President George H.W. Bush. He said this would allow it some flexibility in making cuts.

OMB said Friday that it will be issuing the sequester order on the account level and agencies will determine the program, project and activity definition.

“The thousands of PPAs government-wide change every year based on the appropriations acts, reports, and president’s budget, so there is no single, static list,” an official said.

Through apportionment, the administration could delay cuts for months, though they would still have to be done by Oct. 1. This would allow the government to put all cuts to the FAA, for example, to the month of September if it so wished.

Some accounts are so broadly defined they give the administration a lot of flexibility. For example, the Pentagon’s operations and maintenance account includes thousands of contracts and different activities from which to choose the cuts.

Republicans have argued the Navy’s decision to not deploy the USS Harry Truman aircraft carrier because of sequestration — which will save roughly $300 million — could have been avoided.

The Truman decision was made “for the purpose of adding drama to the sequestration debate,” charged Rep. Duncan Hunter (R-Calif.) in a letter to Deputy Defense Secretary Ashton Carter.

“This is the most over-hyped event…it is all for political purposes,” said Steve Bell, a budget expert at the Bipartisan Policy Center.

Pentagon leaders have acknowledged they could have chosen to deploy the Truman and cut elsewhere.

“Could the money to pay for the deployment have been found somewhere else? Perhaps,” Carter wrote in the letter to Hunter obtained by The Hill.

But he said the Pentagon didn’t see a better option, particularly given an $8.6 billion shortfall in the Navy’s operations and maintenance accounts caused not only by the sequester but by the lack of a 2013 appropriations bill.

“Without the ability to transfer funds rapidly from other accounts, there aren't many places from which we could have taken these funds without a greater cost to readiness elsewhere,” Carter wrote to Hunter.

Carter told reporters at a Pentagon briefing Friday that the Pentagon was also using its flexibility in operations and maintenance to ensure that training is protected for units headed to Afghanistan.

In contrast to the huge DoD operations and maintenance account, the Health and Human Services Department’s Low Income Home Energy Assistance program provides just that — help to the poor for energy bills, energy crises and weatherization and energy-related minor home repairs. Experts agree there is much less flexibility for the administration to avoid the 9 percent cut.

Another example is unemployment benefits, where the Department of Labor has little option but to cut benefits.

Joe Minarik, a chief economist in President Clinton’s budget office, said the administration is likely to highlight cuts it sees as bad for the economy to make its political point. But he also said there is a risk for the administration in trying to amplify the perniciousness of the cuts.

“The administration is going to be torn, because on the one hand you don’t want to be accused of managing poorly,” he said. “On the other hand, your political ambitions might lead you to emphasize the other side has overplayed and put [the public] well being at risk.”

The administration has two additional powers under sequestration: transfer authority and reprogramming.

Transfer authority is explicitly granted by appropriations bills and each department has differing degrees of authority. It allows an agency to transfer money between specified accounts, which could allow an agency to save a little money in one area and cut more in another.

For example, if Navy shipbuilding costs rise due to inflation, the secretary of the Navy has the power to transfer up to $100 million into the shipbuilding account, said Shai Akabas of the Bipartisan Policy Center.

Still, in general, Akabas said transfer authority is very limited in legislation, since appropriators want to protect their prerogatives. And the authority is never wide enough to allow the White House to move money between departments.

Reprogramming occurs when an agency wants to shift money between programs within a specified account. For example, if the appropriations bill requires the Air Force to use an account to build five airplanes, the Air Force can request reprogramming authority to finish four, rather than delay all five, to meet the sequester.

By tradition, this requires the consent of the relevant House and Senate Appropriations subcommittee charmen and ranking members, and in the case of Defense the authorizing committee leaders.

The FAA budget appears to fall into a gray zone that is already leading to scrutiny from Congress.

The White House and Department of Transportation have warned repeatedly that the FAA’s $600 million sequestration cut will result in flight delays because air traffic controllers will have to be furloughed.

Republicans on the House Transportation and Infrastructure Committee say the FAA could make cuts in other parts of its budget instead. They say the FAA could cut the $482 million from its operations account, which includes air traffic controllers, through a combination of freezing hiring, cutting non-personnel expenses like traveling and banking savings from the pre-sequester first quarter of 2013.

The rest of the FAA's cut would come from reducing its facilities and equipment account by $142 million and cutting its reach and development account by $8.6 million.

FAA officials say the law requires them to make equal cuts across every FAA account.

The Transportation Security Administration (TSA) has issued similarly warnings about the sequestration budget cuts, arguing that wait times at major airport security checkpoints would stretch to four hours long because TSA screeners would have to be furloughed seven days in 2013.

Republicans have cast doubt on those claims too, arguing that the agency has grown faster in recent years than the commercial airline industry and that lines should not be a problem.

“Once again, the TSA, you've seen [the number of] flight passengers have been flat in this country, but yet the TSA workers have increased by 3,000 members," Transportation Committee Chairman Rep. Bill Shuster (R-Pa.) said in an interview with Fox News.

"You've also got risk-based assessment and pre-screening that makes their job a little bit either, so we have the people in place," Shuster continued. "I do not believe properly managed that we will have any problems with the TSA or the FAA."


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